Keywords

These keywords were added by machine and not by the authors. This process is experimental and the keywords may be updated as the learning algorithm improves.

1 Introduction

Genetic resources (GR) and the traditional knowledge (TK) about their use, for example, for traditional medicinal purposes, hold multiple values for society. They also form valuable inputs into basic research and development activities in the life science industry. However, the sustained conservation of nature that hosts GR, and the access to them, requires governance structures which involve clear property rights. It is in this context that the Convention on Biological Diversity (CBD) addresses bioprospecting projects in developing countries by aiming to provide conservation incentives under favourable conditions to biodiversity holders while facilitating GR access to external users.

Much of the economic analyses on bioprospecting tend to focus on GR valuation and on theoretical assessments of the effect of the current international patent legislation, which is often criticised for giving firms only short-term incentives to invest in biodiversity (e.g. Goeschl and Swanson 2000; Rausser and Small 2000). Other research (e.g. Mulholland and Wilman 2003) has explored theoretical aspects of the functionality of different benefit sharing modalities in bioprospecting projects. Other analyses have addressed the relationship between bioprospecting outcomes and the jurisdictional governance setting (e.g. OECD 2003; SCBD 2008; UNU-IAS 2008). However, as highlighted by Polski (2005), there is a lack of empirical evidence about the performance of bioprospecting contracts, especially on the governance factors that influence bioprospecting schemes as framed by the CBD. One such understudied governance aspect is the nature of the contractual hazard involved in bioprospecting projects (SCBD 2008).

In this chapter, contractual hazard refers to the conditions that make a contract be interrupted or finished before the respective rights and responsibilities of the project are fulfilled. This notion has a non-evaluative connotation; that is, it is not associated with a normative evaluation of whether bioprospecting contracts as such are positive or negative in terms of conserving biodiversity, nor if they are an effective means for promoting fair and equitable allocation of rights and responsibilities between stakeholders. In fact, bioprospecting contracts, as market-based legal mechanisms, vary substantively because it is up to the parties to decide the content of each individual contract.Footnote 1 Among the many normative interpretations of what is a successful bioprospecting project (see e.g. Shiva 1997; ten Kate and Laird 1999), here we define a successful bioprospecting project more simply as a project that proceeds without cancellations or interruptions.

In this chapter, we cast new light on the link between different institutional designs of bioprospecting projects and the project outcomes. We analyse the main institutional roles of governments in terms of clarifying and enforcing property rights of GR. This type of analysis is carried out using standard concepts from institutional economics (e.g. Oxley 1999; Williamson 1985, 1999, 2005). The main idea or hypothesis that we hold here is that transaction costs associated with public policies to regulate bioprospecting might cause contractual hazard in such projects, which may bear negative effects on their outcomes.

We specify a theoretical framework based on the idea that there is likely to be trade-offs between having clear and enforceable property rights for biodiversity holders and the level of transaction costs associated with setting those property rights. We also pose that governments might under certain circumstances ease contractual hazards. In order to understand the link between government intervention and concrete outcomes of bioprospecting contracts, it is necessary to understand the role of government intervention within the overall context of the contractual project. In this chapter, we explore empirically the role that the two mentioned government functions have on the overall contractual context of the projects to shed light on whether and the extent that governments can aspire to have a significant role in affecting bioprospecting outcomes. Here, we refer to the contractual context as the institutional conditions under which the parties negotiate the content of bioprospecting projects and implement them.

2 The Nagoya Protocol’s Influence on Sovereignty and Property Rights

The entering into force in 1993 of the CBD was a critical event for rights claims over GR because it spread the debate of whether sovereignty implies property rights over GR including access and benefit sharing rights and obligations over these resources and associated knowledge.Footnote 2 In 1992, the CBD was opened for signature, and it has been ratified by 193 countries to date.Footnote 3 The CBD recognises the sovereign rights of states over GR and mentions that national governments have the authority to determine the access to or exclusion from GR through national legislation (CBD 1992 Article 15.1). The CBD, in its Article 15, entitled “Access to Genetic Resources,” states: “1. Recognizing the sovereign rights of States over their natural resources, the authority to determine access to genetic resources rests with the national governments and is subject to national legislation” (italics added).

It is important to note what the CBD explicitly expresses in terms of sovereignty and property rights. The relationship between sovereignty over GR and property (which is not explicitly mentioned in the CBD) is often politically and academically contested (see e.g. Coombe 1998; UNEP 2005; Elvin-Lewis 2007; Caneiro-da-Cunha 2008). Sovereignty does not necessarily equate to property. Johnston (interview 21 January 2009) considers that the relationship between sovereignty and property implies a political exercise.Footnote 4 It is up to the countries to shape their own interpretation concerning sovereignty rights to GR under Article 15 of the CBD.

Countries have opted for three main approaches: first, some countries have signed and ratified the CBD but have not related the term sovereignty to property. A second approach has been chosen by several of the so-called developing countries which have actively engaged in its interpretation and implementation. These countries emphasise the states’ sovereignty over GR as being recognised under the CBD, with national legislation about access and benefit sharing, and property rights over GR. A third approach is followed especially by industrialised countries, which does not consciously refer to the CBD but use other international treaties to make the connection between GR and property. For example, the USA makes the connection between GR and property without referring to the interpretation of Article 15 of the CBD but relating GR to property under the intellectual property rights system. The intellectual property rights law has expanded in many ways, including into fields such as software, and biotechnological products and processes. In this context, the CBD has had a strong impact on the sociolegal dynamics associated with biocultural rights in national and international law.Footnote 5 Hence, the Convention on Biological Diversity, as an international legal instrument with a binding character, has changed the landscape of property rights claims over biocultural resources. In particular, the CBD has influenced the way in which bioculturally-rich countries reassert and interpret the legal principle of state sovereignty over plant forms.

In 2010, the Nagoya Protocol on Access to Genetic Resources and the Fair and Equitable Sharing of Benefits Arising from their Utilization (Nagoya Protocol) was agreed in the 10th Conference of the Parties of the CBD in order to advance in the implementation the CBD’s third objective.Footnote 6 The Protocol is still ambiguous in parts, such as regarding products derived from genetic resources (Bille et al. 2010). However, in contrast to the text of the CBD, the Nagoya Protocol refers explicitly to intellectual property rights in relation to benefit sharing, prior informed consent and mutually agreed terms. In its Article 6, it mentions the need to “establish clear rules and procedures for requiring and establishing mutually agreed terms. Such terms shall be set out in writing and may include, inter alia: … (ii) Terms on benefit-sharing, including in relation to intellectual property rights” (emphasis added) (Article 6.3(g)). Article 6 also states that “access to genetic resources for their utilization shall be subject to the prior informed consent of the Party providing such resources that is the country of origin of such resources or a Party that has acquired the genetic resources in accordance with the Convention, unless otherwise determined by that Party” (Article 6.1). In the Annex to the Nagoya Protocol, “Joint ownership of relevant intellectual property rights” is mentioned as a potential monetary and non-monetary benefit derived from access and benefit sharing agreements.

Based on the above-mentioned Article 15 of the CDB, one interpretation is that states have the right to vest the property rights over GR located in their territory and allocate these rights on the government or alternatively on individual or collective owners of land where the GR are located. Consequently, the CBD has strengthened GR providers’ claims on benefit sharing (e.g. ten Kate and Laird 1999; Tobin 2002). Under the CBD and the Nagoya Protocol in particular, if the interests of the government and local communities on whose lands GR resides are in tension, the final decision-maker would be the national government and would need to base its decision on the respective national legislation (see Article 15.1, CBD).

Provisions under the CBD (e.g. Article 8(j)) and the Nagoya Protocol recognising the rights of indigenous and local communities to GR and TK include such a limitation by including phrases such as “in accordance with domestic legislation.” For example, Article 5 of the Nagoya Protocol entitled “Fair and Equitable Benefit-sharing” mentions: “Each Party shall take legislative, administrative or policy measures, as appropriate, with the aim of ensuring that benefits arising from the utilisation of genetic resources that are held by indigenous and local communities, in accordance with domestic legislation regarding the established rights of these indigenous and local communities over these genetic resources, are shared in a fair and equitable way with the communities concerned, based on mutually agreed terms” (emphasis added) (Article 5.2). The recent Nagoya Protocol though may offer certain means of articulating the interests of governments and local communities specifically through notions such as the recognition of biocultural community protocols and customary norms including the use and exchange of GR and associated knowledge within and among indigenous and local communities (see Articles 12.1; 12.3(a); 12.4 and 18.5).Footnote 7

3 The Role of Governments in Bioprospecting

In this section, we focus on two key roles played by governments in bioprospecting: firstly, to set the scene for bioprospecting by shaping the national regulatory framework for such projects, and secondly, to enforce that framework by participating in the implementation of bioprospecting projects.

3.1 Setting the Market Scene

The CBD aims to provide long-term conservation incentives (e.g. MA 2005; Bille et al. 2010). However, here we question whether the CBD may cause unintended effects in the short term in terms of potentially placing obstacles in bioprospecting projects. Specifically, CBD may cause uncertainty within the projects that may reduce their scope for providing long-term conservation incentives.

Uncertainty tends to cause transaction costs (Williamson 1985; Bromley 1991) where such costs are broadly understood as the costs of running the economic system (sensu Arrow sensu 1969: 48) and create concomitant contractual hazard, that is, negatively influencing factors that increase the risk of deviating contract outcomes from the contractual goals (Oxley 1999). Transaction costs in terms of contractual hazard and their links to modes of governance have been explored in the literature, not least regarding business alliances at the domestic and international levels (Oxley and Sampson 2004; Oxley and Silverman 2006) and their effect on project outcomes (Poppo and Zenger 2002; Wang and Chen 2006). Generally, under high uncertainty, leading to transaction costs, coordinated instead of autonomous adaptive capacity to uncertainty is usually held to perform better (e.g. Oxley 1999; Williamson 1999; Oxley and Silverman 2006).

Transaction costs in bioprospecting projects are directly linked to government policies in order to regulate bioprospecting projects and may cause contractual hazard, which often bears a negative effect on their outcomes. A potential consequence is a trade-off between having clearly enforced property rights by governments regarding biodiversity holders such as rural communities, and transaction costs potentially leading to contractual hazard and increasing the risk of failure of bioprospecting contracts. This may be due to contract hazard being a function of the attributes of the providers or the demanders of GR as well as their capacity to adapt their alliance within bioprospecting projects.

Well-defined property rights are generally held as a precondition for reducing uncertainty in investment decisions (Pindyck 1988; Caballero 1991; Dixit and Pindyck 1994; Bell and Campa 1997). This argument has been put forward also for bioprospecting, leading to the idea of the need for clear regulatory frameworks (Bhatti 2003; Larson-Guerra et al. 2004) to facilitate negotiation of new projects (Tobin 2002). Prior to the CBD, access to GR was often gained without consent of GR holders, leading to situations known as biopiracy. Demanders used to identify and locate GR that appeared valuable for their aims. Bioprospecting projects were conducted largely without formal contracts, but instead demanders of GR would sometimes pay a small amount of money up-front to the provider of GR, as a compensation only for the labour time local people who helped to locate the GR being sought. However, under the CBD, countries have the right to vest the property rights over GR located in their territory and grant these rights to the state or alternatively on individual or collective owners of the land where the GR can be found (CBD, Article 15). As a result, the CBD has strengthened GR providers’ claims on benefit sharing (e.g. ten Kate and Laird 1999; Tobin 2002).Footnote 8

Changes in local institutions often affect contractual hazard because they can potentially open up for disputes of interest in the quest for private appropriation of benefits (e.g. Libecap 1989; Ostrom 2007). This is typical, for example, with the entrance of external stakeholders in order to extract locally available natural resources. One example associated with bioprospecting refers to the situation where biotechnology has expanded the use of GR in pharmaceutical research and has increased demand for GR from the South (Parry 2004). Consequently and logically, the CBD is striving to solve the resulting North-South disputes in such situations (Dutfield 1999; Suneetha and Pisupati 2009). But in doing so too, the CBD might have increased transaction costs in bioprospecting (Swanson et al. 2002), for instance, by increasing the need to identify and specify ownership to GR and associated TK. Such transaction costs can be especially high especially in situations where ownership of GR is contested among cross-border communities and whose investment in biodiversity conservation is often distributed across generations (Laird 2002; Parry 2004; Dedeurwaerdere 2005).

The number of stakeholders and the heterogeneity in bioprospecting contractual arrangements have increased significantly, following CBD ratification among countries. Since the notion of “rights” encompasses different definitions for different bioprospecting stakeholders (Parry 2004; Hayden 2008), differences in beliefs and motivations among project participants have also increased (ten Kate and Laird 1999), regarding legal concepts, as well as differences in how the agents involved in projects organise their social and economic activities (Brush 1999). This can result in a higher degree of uncertainty about whether there is, or what is the definition of, a “just sharing of benefits” from GR and TK (Laird 2002). Hence, bioprospecting legislation becomes more complex and harder to use as a means to assist the governance of the different interdependent interests that need to be addressed. The latter ranges from social development and biodiversity conservation to a predictable investment context (Larson-Guerra et al. 2004). For example, even the Costa Rican bioprospecting legislation, which has received much praise in the past, has been criticised for not sufficiently addressing indigenous communities’ claims over ownership of GR and TK and hence appropriate compensation levels (Carrizosa 2004).

Additionally, the effectiveness of property rights over GR hinges on the cost of enforcing them. Increasing the level of detail in national laws inspired by the CBD also increases the bureaucracy in source country governments, which tends to further increase transaction costs in bioprospecting. In addition, binding laws with a lack of clear authority can create further obstacles, especially in settings where there is a lack of clearly defined authority to issue the necessary permits for bioprospecting (Laird 2002).

3.2 Active Government Participation in Project Implementation

Another way for governments to influence the outcome of bioprospecting projects is by directly engaging in their implementation. The role of transaction costs in contractual hazard and modes of governance, such as in business alliances at the domestic and international levels (Oxley and Sampson 2004; Oxley and Silverman 2006), and the effect that transaction costs have on project outcomes (Poppo and Zenger 2002; Wang and Chen 2006) can be explained focusing on ideas from new institutional economics.

Decentralised organisations tend to provide high-performance incentives, also known as “incentive intensity” (Williamson 1985).Footnote 9 They also tend to have high capacity for autonomous adaptation to uncertainty. However, when transaction costs are high, due to contractual uncertainty, coordinated as opposed to autonomous adaptive capacity to uncertainty tends to perform better (e.g. Oxley 1999; Oxley and Silverman 2006; Williamson 1999). It follows that contractual hazard in bioprospecting could be reduced by an adequate organisational set-up (ten Kate and Laird 1999). Table 5.1 characterises bioprospecting projects as conforming to either two private participants (“private-private”), two governments (“public-public”) and a mixture (“public-private”), with their respective expected characteristics.

Table 5.1 Typology of governance attributes of bioprospecting contracts
Full size table

Governments are an example of strong vertical integration with high capacity for coordinated adaptation to uncertainty. They may be well placed to handle complex project coordination tasks that are themselves a result of multifunctional resources. Governments can also build and transfer knowledge collectively about how to manage complex projects, such as in the context of the CBD. The question thus arises as to whether government participation in the implementation phase of bioprospecting projects, by, for instance, providing capacity for coordinated adaptation to the inherent uncertainty of such projects, can help to reduce transaction costs and contractual hazard in the context of bioprospecting. Similarly, one could ask whether weakening the role of the private sector as a bioprospecting partner reduces the capacity of projects for autonomous adaptation to uncertainty. Answering these questions helps to shed light on the potential role of public-private alliances to reduce the level of transaction costs that are common to most bioprospecting endeavours. In the next sections, we provide an empirical analysis to shed light regarding this issue.

4 Methods

4.1 Data

A database of 190 bioprospecting case studies was constructed from a systematic review of the literature that for the most part contained information from individual project case studies described by social scientists who revised individual projects in which they were not themselves directly involved. In a few cases, the reports were written by the bioprospector themselves (e.g. ICBG), and these were quality checked with interviews with independent experts from academia, ex situ collections for GR and the private industry.

A detailed analysis was conducted on a subset of 67 cases which held sufficient information for the purpose of the analysis. The dataset included bioprospecting projects that were initiated between the years 1990 and 2003. The geographical spread is Africa (11 cases), Asia (16 cases), Latin America (28 cases) and Small Island Developing Nations (12 cases). These projects were associated with the transaction of principally plant GR but also microorganisms and in one case, animal GR. Most of these cases were also associated with TK and in some cases involved the explicit participation of traditional communities in the bioprospecting projects.

Since there is no centralised accurate dataset of bioprospecting cases, it was not possible to determine the actual number of all bioprospecting cases in the world. While the results cannot be directly extrapolated directly, the cases in the sample used here are fairly representative of typical North-South bioprospecting contracts. It could be argued, though, that there might be some bias as data for relatively successful cases might be overrepresented. However, the fact that the database includes also a large part of more or less failed contracts partly responds to this concern. Nonetheless, the overall results should be taken with due caution as they represent a first attempt at understanding contractual hazard based on available data rather than on all existing bioprospecting cases.

4.2 Identification of Relevant Variables

Following the discussion in Sect. 5.2, it is held that contractual hazard constitutes the link between the market setting and project outcomes. We expect that higher transaction costs in the contracts cause contract hazard, which in turn increases the likelihood of negative project outcomes.

Bioprospecting projects are re-evaluated along the contracting process as typically any investor faces repeated situations where they need to choose whether to continue the contracting process or to wait in order to acquire additional information. A variable is specified that denotes the outcome of individual biopros-pecting projects. Projects that have either been cancelled or experienced substantial interruption are distinguished from those that have proceeded uninterrupted.Footnote 10 Table 5.2 describes the variables and adds additional information and a principal component analysis is conducted (Sect. 5.1).

Table 5.2 Description of variables
Full size table

In order to look into the potential effect of the legal framework for bioprospecting causing transaction costs which in turn may increase contractual hazard, hence potentially undermining contract outcomes, a set of three categorical variables which are interpreted together is introduced: “CBD RATIF” denotes the strongest form of formal legal certainty, that is, projects initiated in a country that has ratified CBD.Footnote 11 “CBD NONE” denotes projects subject to low formal legal certainty because they were initiated before CBD entered into force globally in 1993. The comparison variable “CBD WORLD” denotes whether the bioprospecting project was initiated before CBD came into force globally (which implies it must have been initiated before source country ratification of CBD) or after the CBD came into force globally (which can imply either before or after source country ratification of CBD). CBD RATIF could be expected to have a negative effect on bioprospecting project outcomes by incrementing transaction costs and contractual hazard. CBD NONE is expected to have a positive effect.Footnote 12 Footnote 13

The complementary question regarding the potential effect of government participation in bioprospecting projects is addressed in a tentative way by analysing how the participation of different kinds of project participants affects the outcome of the projects. A supply side and a group of three demand side variables as well as an interaction variable are introduced to represent the level of government participation in the project. “PROVIDER GOV” denotes whether the source country government participates as an active partner in the bioprospecting contract.Footnote 14 We primarily expect that active government participation makes it more likely that the CBD provisions are implemented, adding a layer of transaction costs to the project. But source government participation may to some extent also provide further capacity for coordinated adaptation to uncertainty. A positive coefficient associated with this variable may suggest that the positive influence of such capacity is stronger than the negative bureaucratic influence on project outcomes.

A group of three variables representing different levels of government participation is also accounted for, reflecting different levels of vertical integration. The strongest government participation case is represented by the variable “NCI” which is associated with projects by the US National Cancer Institute, a governmental organisation. Another variable, “ICBG”, denotes the International Cooperative Biodiversity Group and represents a consortium of governmental, industry participants and often academic participants. The comparison variable “DEMANDER PRIVATE” denotes a non-governmental demander such as those from the pharmaceutical sector.Footnote 15

Since the capacity for adaptation to uncertainty represented in the entire project alliance is expected to be relevant key aspect affecting project outcomes, the variable “NCI ICBG-GOV” denotes that the provider government participates and that the government is present on the demander side (either by ICBG or NCI). We expect a negative effect because both capacities for coordinated and autonomous adaptation may be needed to govern GR.

Further, it is also necessary to analyse the determinants of the various project outcomes both at the contract level and at the level of the provider country. Firstly, the intended use of GR by the demander may affect project uncertainty, and to control for this, two categories of pharmaceutical companies are taken into account.Footnote 16

We expect that the pharmaceutical sector in general has attributes associated with high uncertainty, transaction costs and therefore high likelihood of contract interruptions. The reason is the high uncertainty associated with developing new drugs, gaining patent approval and regulatory approval for marketing and subsequently successfully markets the drug. The variable “DEMANDER END” represents pharmaceutical organisations that commercialise products at the end of the innovation chain (although they may additionally enrol in research and development, R&D, activities). Another type of demander not engaged in commercialisation, but only in research and development activities, is denoted by “DEMANDER RND.” Lastly, the third variable in this group, “DEMANDER NON_PHARM”, denotes a minor number of bioprospecting cases in which the demander is from other than the pharmaceutical sector.

The variable “DEMANDER DOMESTIC” denotes whether the organisation on the demander side of the project is located in the provider country, with an expected positive association with uninterrupted outcomes (due to e.g. an informational advantage concerning the cultural setting, as well as national legal and institutional frameworks).Footnote 17

It is also important to control for whether the bioprospecting projects constitute an extension to prior bioprospecting projects. Project renewals are expected to affect project outcomes positively by giving more room for sequential decision-making and hence reduced problems of measurement and behavioural uncertainty (e.g. Balakrishnan and Koza 1993; Williamson 1985). This is taken into account by the variable “RENEWAL”.

Other factors at the more macro level which might influence the outcome of bioprospecting projects can be controlled for to some extent. For example, GDP per capita in the provider country (“GDP CAP”) is included to control for the possibility that governments in poorer countries have fewer resources to set aside for implementing and enforcing regulation of bioprospecting (Gupta 2004; Siebenhuner and Suplie 2005). Likewise, information about rural population growth (“POP GROWTH”) is included, since rural population growth might put pressure on local institutions and property rights regimes, thereby affecting project outcomes in a negative way.Footnote 18

4.3 Description of the Data

Figure 5.1 depicts the main group of variables related to market setting attributes associated with the property rights setting of bioprospecting projects. The figure relates property rights regime (the three CBD variables) to project outcome and is consistent with the expectation as developed in Sect. 5.2, that is, that the market setting for bioprospecting, measured by the status of CBD, is associated with the outcome of bioprospecting projects. As it can be seen, the highest share of unsuccessful project is in countries that have ratified the CBD.

Fig. 5.1
figure 1

Project outcome and status of CBD for the cases used in the categorical principal component analysis (the numbers in the bars indicate number of cases per outcome, n  =  67)

Full size image

Table 5.3 describes the data regarding the type of active government participation in the project. The table orders the variables with respect to project participation by provider country governments. It can be seen that slightly more than half of the projects in the sample proceeded without cancellations/interruptions (the mean value of OUTCOME is 53%). Interestingly too, it can be seen that provider country governments participate more frequently in countries that have ratified the CBD.

Table 5.3 Variables ordered by whether the provider country government participated or not (mean, n  =  67)a
Full size table

However, participation by provider country governments in the contracts does not appear to be associated with project outcomes. Additionally, the private sector is the most common bioprospector in our sample with pharmaceutical RnD organisations being the most common demander, followed by pharmaceutical organisations that also engage in manufacturing and sales (DEMANDER ENDMARKET). The most notable difference in the level of government participation from the source country is among RnD pharmaceutical organisations and non-pharmaceutical organisations. A minority of projects, 26%, are renewals.

Table 5.3 also shows that source country governments participate more frequently in richer developing countries (the mean GDP per capita is higher in projects in which the source country government participates, with USD 5,193 as compared to USD 2,414). This may indicate that countries with more solid government institutions (as typically associated with higher GDP per capita) have a higher ability to implement international legal obligation and country level legislation in general.

4.4 Analysis of Contractual Hazard in Bioprospecting

In order to understand the link between government intervention and specific outcomes of bioprospecting contracts, it is necessary to understand the role of government intervention beyond the contract level. Therefore, we empirically explore the role that the two mentioned government functions have on the overall contractual context of the projects. Although the data does not allow controlling for all potential factors that might affect project outcomes, the included variables can together be related to a substantial source of influence in contractual hazard.

Based on a principal component analysis (PCA), we identify dimensions (or groups of variables) which account for underlying relationships in the data beyond the effect of isolated individual variables alone. Specifically, we use a categorical PCA (henceforth CatPCA) to provide insight by (1) identifying which groups of variables associated with the role of the government in setting the market scene, or actively implement bioprospecting project as an active participant, have influence over the project contractual context and the degree of that influence; (2) pointing out pre-established expected relationships or, in an explorative way, gain insight into the role of variables not envisioned to have an influence on project outcomes; (3) looking at how such dimensions rank in importance between each other; and (4) looking at how individual variables rank in importance within each dimension.

A particularly useful feature of CatPCA that adds to standard PCA is a rescaling procedure. In standard PCA, only continuous or categorical variables can be analysed separately, not together. The CatPCA rescaling procedure transforms continuous variables to categorical variables ordered in seven levels. While this means that information is lost as compared to the original continuous variable, it does allow including considerably more information as compared to a transformation to a dichotomous variable as typically used in standard PCA.

5 Results and Discussion

Table 5.4 shows the results of the CatPCA. All three dimensions included have an eigenvalue above one: 3.67, 2.83 and 1.95, respectively. The overall explanatory power of the variables is reasonable, at 49.7%, with 21.6%, 16.6% and 11.4% of the variance explained, in the first, second and third dimension, respectively. We follow Kline (1994) and classify loadings higher than 0.30 as “moderate to high.” According to this criterion, all variables except for RENEWAL and GDP_CAP have reasonably high explanatory power in at least one of the three so-called underlying, or latent, dimensions.

Table 5.4 Summary of categorical principal component analysis (n  =  67, variables ordered along dimensions and along their factors loadings with highest loadings to the left)
Full size table

The first dimension is largely explained by variables relating to the governments’ active implementation as a project counterpart in the bioprospecting cases (Table 5.2). The highest component loadings are represented by projects with governments at both the supplier and demander side (NCI ICBG-GOV), followed by project with private demanders (DEMANDER PRIVATE) and ICBG projects. Fourth are projects in which the provider country government participates (PROVIDER GOV). A key focus is in interpreting the interaction variable, since the contract hazard is a function of the overall capacity for adaptation in the alliance of providers and demanders, not only of the attributes of the providers or the demanders as analysed separately. Hence, when analysing the supplier and demander side together instead of separately, the variable “NCI ICBG-GOV” shows that strong government participation (i.e. governments participate as both supplier and demander) has a strong influence over the bioprospecting contract context as compared to other projects where there is no governmental participation at all. This may suggest that capacity for coordinated adaptation is important in order to address the high level of uncertainty about, for example, commitment to contractual terms in bioprospecting.

This information provides tentative support for the role that different kinds of government participation plays in explaining the bioprospecting contractual context. This dimension being the first in terms of component loadings, it means that among the variables included, government participation of one kind or the other is what most influences the bioprospecting contract context.

The second dimension relates somewhat to the market setting of bioprospecting contracts.Footnote 19 The variable representing the specification and protection of property rights for GR has the highest component loading (CBD RATIF). CBD NONE also has a significant loading in the second dimension and also represents the market setting. Rural population growth (POP GROWTH) with the fourth strongest loading might be assumed to proxy the broader institutional context of the project. Taken together, the results of these three variables can be interpreted as that the second strongest influence to the bioprospecting contractual context among all the variables assessed is the government’s role to specify the market context.

Lastly, the third dimension can be said to represent the purpose (commercial/non-commercial) of the demanded GR, with the two variables denoting a demander from the pharmaceutical industry (DEMANDER END and DEMANDER RnD) having the third and fourth highest component loadings within this dimension according to the categorical PCA.

The activity of the demander (DEMANDER RND, DEMANDER NON-PHARM) is less clear to interpret, since they are distributed across two different dimensions, and does not have significant loading in any of the two. Therefore, it is not possible to interpret the different effects of having pharmaceutical end market firms, pharmaceutical R&D organisations or non-pharmaceutical organisations playing a role in bioprospecting contracts. One possible interpretation is that uncertainty related to institutional factors (e.g. market setting and government participation) has a greater role in project outcomes as compared to technical uncertainty of downstream research and commercialisation activities. Interestingly, the fact that projects might be renewed (RENEWAL) does not seem to influence the contractual context, possibly due to the strong influence of the government’s role both as active implementation participant and by setting the market scene.

The results of the CatPCA analysis are fairly consistent with the conceptual framework regarding the role that active government participation in project implementation plays in the bioprospecting contractual context. The results indicate that governments might not only influence the project by setting the property rights scene (through ratification of CBD) but more importantly by actively implementing such projects as a project partner.

6 Conclusions

Against the background of the recent Nagoya Protocol (October 2010) on access and benefit sharing of genetic resources, in this chapter, we have attempted to cast new light on how the CBD might be, in an unintended way, affecting bioprospecting projects in the short term. The focus has been on assessing the government’s role in setting the market scene for genetic resources by specifying the property rights and implementing the bioprospecting policy framework. Based on a systematic review of bioprospecting case studies, we suggest that the CBD, which has led to more clearly defined property rights over genetic resources regarding ownership of the providers, might have had a strong effect on the contractual context. The reason is that stricter property rights, while being the foundation for linking southern conservation effort with financial incentives, might have also caused a novel contractual situation. From reviewing bioprospecting cases and interviewing bioprospecting stakeholders, we think that by the emergence of new stakeholders and socio-economic contract contexts, contract uncertainty might have increased, in turn increasing contractual hazard. Such contractual hazard can be ameliorated by the type of government involvement in the implementation of bioprospecting projects.

After the adoption of the Nagoya Protocol, a major critique has been raised against it, on the basis that the Protocol is ambiguous in parts, etc. Here, we put forward an additional idea: even a clear and specific protocol would in fact not be sufficient to overcome the high contract uncertainty built into any bioprospecting project due to their inherent heterogeneity in terms of both asymmetric information and expectations about the outcomes of such projects.

It is a fact that there are ample difficulties to implement benefit sharing for genetic resources at the international level. It is important to note in this context that if the allocation of private property rights over genetic resources is envisaged, special attention ought to be paid to the institutional set-up of bioprospecting projects. As private property rights might be further strengthened in bioprospecting cases, the role of governments become increasingly more important. But there is still much to be learnt about the way public and private stakeholders can efficiently and equitably interact to help achieve the CBD’s goal of conservation, access to and benefit sharing of global biodiversity. It will be necessary to systematically assess how the Protocol has affected contract hazard in bioprospecting projects as new data on projects become available.