Plant patents help firms exercise market power, which solves the disad.
Keith Fuglie & James MacDonald 23, Certificate of Public Leadership, Brookings Institution, 2014 Ph.D. and M.S. in Applied Economics, University of Minnesota B.A., Concordia College, Moorhead, Minnesota, Jim received a Ph.D in economics from the State University of New York at Buffalo. He also received an M.A. from SUNY Buffalo and a B.S. in economics from Siena College., 8/28/23, USDA ERS, “Expanded Intellectual Property Protections for Crop Seeds Increase Innovation and Market Power for Companies”, https://www.ers.usda.gov/amber-waves/2023/august/expanded-intellectual-property-protections-for-crop-seeds-increase-innovation-and-market-power-for-companies/, kcab
A firm’s ability to exercise market power also may be affected by the concentration levels in an industry. Economic theory suggests that some degree of market power leads to private R&D investment. However, too much market concentration may reduce competition and take away firms’ incentive to innovate. The cost of R&D and regulatory requirements might deter firms from entering the field, further limiting competition and new sources of innovation.
Antitrust agencies have focused more heavily on innovation concerns in the last two decades; these concerns have become an important feature in a growing number of cases across the economy and in agribusiness. However, not much empirical evidence exists on the effect of competition on research investments and innovation—and, specifically, on how many rivals are necessary to spur innovation. This issue will remain an important question for antitrust policy and economic research.