Contributed paper prepared for presentation at the

57th AARES Annual Conference, Sydney,

New South Wales, 5th -8th February, 2013

Strategic positioning of international agricultural

research centres: Comparative advantage and trade-

offs from a transaction cost economics perspective

Josey Kamanda1 (Corresponding Author), Regina Birner

2 and Cynthia

Bantilan3

1Division of Social and Institutional Change in Agricultural Development

(490c) and Food Security Centre (FSC), University of Hohenheim,

Wollgrasweg 43, 70599 Stuttgart, Germany, Phone: +4971145922514,

Email: kamandao@gmail.com

2Division of Social and Institutional Change in Agricultural Development

(490c), University of Hohenheim, Wollgrasweg 43, 70599 Stuttgart,

Germany

3Research Program on Markets, Institutions and Policies (MIP),

International Crops Research Institute for the Semi-Arid Tropics

(ICRISAT), Patancheru 502324, Andhra Pradesh, India

ii

© Copyright 2013 by Authors’ names.

All rights reserved. Readers may make verbatim copies of this document for non-commercial

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1

Strategic positioning of international agricultural research

centers: Comparative advantage and trade-offs from a

transaction cost economics perspective

Josey Kamanda

1 (Corresponding Author), Regina Birner

2 and Cynthia Bantilan

3

1Division of Social and Institutional Change in Agricultural Development (490c) and Food

Security Centre (FSC), University of Hohenheim, Wollgrasweg 43, 70599 Stuttgart, Germany,

Phone: +4971145922514, Email: kamandao@gmail.com

2Division of Social and Institutional Change in Agricultural Development (490c), University

of Hohenheim, Wollgrasweg 43, 70599 Stuttgart, Germany

3Research Program on Markets, Institutions and Policies (MIP), International Crops Research

Institute for the Semi-Arid Tropics (ICRISAT), Patancheru 502324, Andhra Pradesh, India

Abstract

International agricultural research centres (IARCs) have a mission to reduce poverty, improve

food security, human health and nutrition, and ensure sustainable management of natural

resources. Their role in the research for development (R4D) continuum has long been a

subject of discussion, often with emphasis that they should conduct research that produces

international public goods (IPGs). However, national agricultural research systems (NARS) in

many developing countries have insufficient capacity to translate these products into welfare

benefits. This coupled with higher dependence on bilateral donors that exert pressure to show

impacts have increasingly driven IARCs to engage in participatory downstream work. This

shift has been criticized for placing emphasis on local development agendas at the expense of

IPG delivery. This paper uses insights from the literature to discuss the rationale for setting up

IARCs under the consultative group on international agricultural research (CGIAR), their

governance and transformation over the years and the critical question of how the centres

should position themselves. A conceptual framework based on transaction cost economics

and fiscal federalism literature is used to complement discussions on their comparative

advantage from a normative point of view. While low transaction intensity, asset specificity,

economies of scale and potential for spillovers are important attributes of transactions that

increase the comparative advantage of IARCs over other actors in the R4D spectrum,

contextual factors in different locations may drive centres to deviate from conducting

activities that they are best at.

Keywords: Agricultural innovation; comparative advantage; research spillovers; transaction

costs; CGIAR

2

Introduction

The World Development Report, 2008 on “Agriculture for Development” (World Bank 2007)

stresses the importance of agriculture-led growth to reduce poverty and food insecurity.

Productivity improvements, closely linked to investments in agricultural research, are key

drivers for this growth (Alston et al., 2000). Even though capacities for agricultural R&D are

low in many developing countries, farmers still largely rely on the public sector for

technology transfer (Pineiro 2007). The international agricultural research centre (IARC)

evolved as a model to improve the lives of poor rural people by increasing the productivity of

developing country agriculture (Herdt, 2012). Over time, the mandate of IARCs in the

Consultative Group on International Agricultural Research (CGIAR1

) has expanded to

include reduction of rural poverty, increasing food security, improvement of human health

and nutrition, and ensuring more sustainable management of natural resources.

Agricultural R&D follows a path from research to dissemination to uptake and impact. The

technology and knowledge generation programmes are located on the “upstream” side, while

the “downstream” side comprises delivery programmes (Kassam, 2003). There is concern that

involvement by CGIAR centres in downstream activities (D-end of the spectrum) may

directly compete with other actors and undermine incentives for building national systems

(CGIAR Science Council, 2009). The general consensus has been that the CGIAR focuses on

conducting research that produces international public goods (IPGs). However, a functional

R-D pathway does not often exist, and the link between the outputs they produce with

complementary activities that are the primary responsibility of national and local entities is

often not explicitly defined (Sagasti and Timmer 2008). The lack of adoption is attributed to

the institutional context, especially the failure of government to provide the enabling

conditions. National systems, on the other hand, may hold the impression that centre

researchers are in an “ivory tower” and not in touch with ground-level realities.

Sagasti and Timmer (2008) identify the zone of control and zone of influence by the IARCs

in the IPG delivery system. Centers may indirectly be held responsible for exerting influence

on the network of institutions and building capacity to ensure expected benefits materialize.

This supports the view that involvement in some complementary activities including

adaptation, dissemination, extension, technical assistance, policy advice, and training is

required (Pingali and Kelley, 2007). The centres have had to conduct applied and adaptive

research when developing countries lacked their own capacity to do so (Gardiner and

Chapman 2006). Declines in core funding have also led to increased dependence on bilateral

projects with donor pressure to show impact pushing the centres to conduct more

development-oriented activities. The IARCs therefore face challenges in priority setting,

targeting and strategic positioning. There is need for a clear direction in pursuing their long-

term strategic goals, while being responsive to change and demonstrating accomplishment of

1 It should be noted that although the discussion focuses on the CGIAR, the international agricultural research

system also includes other centers such as the World Vegetable Centre (formerly AVRDC), International Centre of Insect Physiology and Pest Ecology (ICIPE), International Fertilizer Development Center (IFDC), International Centre for Integrated Mountain Development (ICIMOD), Centre for Agricultural Bioscience International (CABI), Australian Centre for International Agricultural Research (ACIAR) among others, which are not part of the CGIAR.

3

short-term donor-driven objectives. They also need to address international development

concerns while responding sensitively to wishes of a broad array of local stakeholder groups

(Horton and Mackay, 2003).

This paper looks at the setup of the CGIAR system and its transformation to address

governance challenges in agricultural research, which is an issue that has often been neglected.

The outstanding debate on the comparative advantage of the centres and tension between

focus on production of IPGs versus more location-specific activities is revisited. From a

normative point of view, this is a decision on what governance structure fits different

transaction types and what level of decentralization would be ideal for each activity along the

results chain. A conceptual framework is developed, based on fiscal federalism literature

(Oates, 1972) and transaction cost economics (Williamson, 1991; Birner and Wittmer, 2004),

to analyze this trade-off.

The fiscal federalism literature has been applied in analysis of decentralization in rural service

provision (Bardhan, 2002; Birner and von Braun, 2009). The argument can be extended to

what activities should be carried out by IARCs and what should be delegated to other actors

such as national agricultural research systems (NARS) i.e. international versus national

provision of public goods. In the transaction cost economics approach, transactions that differ

in their attributes are aligned with governance structures that differ in their costs and

competence. We discuss how the framework can be applied by developing and testing

hypotheses on the types of attributes of transactions that determine how far downstream the

CGIAR centres should go.

The contribution of outputs from agricultural research to improve welfare of the poor depends

on contextual factors where the people live. Along these lines, the paper discusses how

centres may be driven to conduct activities for which they do not have a comparative

advantage. We also discuss how the institutional environment influences the probability of

success in applied and adaptive research and as well as adoption parameters with implications

on total return to investment. The review and analytical framework suggested contributes to

strategic discussions on how impact from international agricultural research can be achieved

most cost effectively.

1. Overview of the CGIAR

The world faces challenges to reduce poverty, improve food and nutrition security and

achieve sustainable management of natural resources with increasing population and threats

such as climate change. IARCs have a role to play in addressing these challenges by driving

scientific developments relevant to agriculture. International agricultural research traces its

origins to the work of the Rockefeller and Ford Foundations in the 1940s and 1950s that saw

the establishment of overseas rural and agricultural development activities (Herdt, 2012). In

1943, a pilot program2 in Mexico sponsored by the Mexican government and the Rockefeller

Foundation developed into an innovative, sustained collaboration between local and

international researchers (Ozgediz, 2012). Since most developing countries faced acute food

2 Scientists, led by Norman Borlaug, produced new higher-yielding, short-statured wheat varieties by

incorporating semi-dwarfing genes originating in Japan.

4

shortages and struggled to feed rapidly expanding populations (Zeigler and Mohanty, 2010),

the foundations invented the IARC model to exploit the emerging scientific advances to

improve the lives of the poor.

The first two centres established were the International Rice Research Institute (IRRI) in the

Philippines in 1960 and the International Maize and Wheat Improvement Center (CIMMYT3)

in Mexico in 1966. Under the leadership of champions such as Robert McNamara, a donor

support group was formed with the Food and Agriculture Organization (FAO) and the United

Nations Development Programme (UNDP) joining the World Bank as co-sponsors (Ozgediz,

2012). In 1971, international agricultural research became institutionalized in the form of the

CGIAR system, which then expanded to 15 centres (Figure 1) through the 80s and 90s.

Challenge programs (CPs) and system-wide programs were formed to shift financing

arrangements from the centres to global and strengthen partnerships among the centres, with

3 CIMMYT derives from the Spanish version “Centro Internacional de Mejoramiento de Maíz y Trigo

Alliance Office

CGIAR Members

Global

Forum on Ag.

Research

Regional

Federations &

FORA (APAARI,

AARINENA, LAC

Form on AR)

Other non-

CGIAR

Institutions

CGIAR

Secretariat

SC

Secretariat

CAS-IP Internal Audit

Gender and

Diversity Program

Chief Information

Office- ICT - KM

Countries:

Developing (25)

Developed (22)

International

Organizations (13)

Foundations (5)

IFAD

UNDP

WB

FAO

Consultative

Group

Executive

Council ExCO

AGMs

Challenge Programs

Advisory Committee

Science Council

Standing Panels

GRPS: Genetic

Resources Policy

Committee

SPIA: Impact

Assessment

SPSP: Strategies

and Priorities

SPME: Monitoring

and Evaluation

SPMS: Mobilizing

Science

Partnership Committee

PSC:

Private

Sector

CSOs

Centers

CIAT

CIMMYT

ICRISA

T

IFPRI

WARD

A

IRR

I

CIFO

R

ILRI

IITA

IWMI CIP ICARDA

Bioversity Int. WAF WFC

Communities of

Practices

Marketing Group

Executive Committee

Alliance

Board

Alliance Executive

Alliance

Subcommittees & AE

Task Forces

System Office

Figure 1: CGIAR system structure before the reform process. Source - Le Page, 2011

5

NARS and other actors. An executive council (ExCo) facilitated the work of the CGIAR with

the Technical Advisory Committee (TAC), later transformed into the science council, setting

priorities and allocating resources (CGIAR Technical Advisory Committee, 2000).

Committees were also included to provide perspectives from NGOs and the private sector.

The Impact Assessment and Evaluation Group (IAEG) continued to operate as the Standing

Panel for Impact Assessment (SPIA).

Meanwhile, the centres faced funding shortages in the 1990’s forcing them to take actions

such as downsizing of staff. There was also an increasing dependence on bilateral projects

with fears that much of the restricted funding involved project activities previously outside

the research agenda of the system.

1.1. The CGIAR Reform Process

In order to effectively harness strengths and assets of different CGIAR centres and improve

the organizational structure of the system, a reform process was initiated in 2009. It involved

adoption of an agricultural-research-for-development (AR4D) approach to take full advantage

of talents and opportunities of different actors in the wider agricultural innovation system

(CGIAR SRF, 2011). The research priorities would be guided by their potential contribution

to system outcomes in line with the CGIAR mission.

The CGIAR Consortium now binds the work of 15 centres under the CGIAR Research

Programs (CRPs) and provides a single contact point for donors. To ensure strengthened and

coordinated funding linked to system agenda and priorities, a new multi-donor funding

mechanism, the CGIAR Fund, finances the research guided by the strategy and results

framework (SRF). Independent advice is provided by a panel of leading scientific experts who

form the Independent Science and Partnership Council (ISPC). The CGIAR Fund was

designed to finance the approved CRPs through two funding windows, one for unrestricted

contributions to be allocated to CRPs by the Fund Council, and the other for contributions

where donors target specific CRPs (CGIAR SRF, 2011). However, donors preferred to have a

third window during the transitional period to provide the option of channelling contributions

directly to specific centres through the CGIAR Fund.

Figure 2: CGIAR new system structure after reform. Source - Le Page, 2011

CONSORTIUM

FUND

CONSORTIUM BOARD

Consortium CEO & Office

Centers

Partners and

Stakeholders

FUND COUNCIL

CGIAR

Research

Programs

Fund Office

Common

Services

FUNDERS

FORUM

Independent Science

and Partnership

Council

Strategy and

Results Framework

Independent

Evaluation

Arrangement

6

The new CGIAR model has faced uncertainty on how donors would respond to the proposed

harmonization, and the bureaucratization and formalism that comes with the results-based

contractual relationships for CRPs between the Fund, Consortium, lead centre, and partner

institutions. There is also uncertainty on how the relationship between the Consortium and the

centres will evolve over time, especially regarding oversight and accountability4 (Ozgediz,

2012). Hartmann (2009) sees the CGIAR reforms as taking research decisions too far away

from centre scientists who interact more frequently with national colleagues, farmers and

national governments and therefore understand local needs. In order to address the challenges

that prompted the reform process, it will be vital to develop a coordinated system of

decentralized experimentation with centralized learning (Ekboir, 2009). The role of the

centres viz-a-viz other actors needs to be clearly defined based on their comparative

advantage.

2. Comparative Advantage of CGIAR centers

In order to effectively contribute to addressing development problems, the CGIAR centres

need to justify how far down the R-D path they should go, and who will be responsible for the

next steps.

2.1. Rationale for International Agricultural Research

The first millennium development goal targets to halve the proportion of people who suffer

from extreme poverty and hunger. The 2008 World Development Report (World Bank, 2007)

stresses the importance of agriculture-led growth to achieve these targets. Although there are

differences across regions, productivity growth has driven agriculture’s global success. This

has been closely linked to investments in agricultural R&D (Alston et al., 2000; Pardey et al.,

2006; Raitzer and Kelley, 2008; Renkow and Byerlee, 2010). Estimates, of nearly 700 rates of

return on R&D and extension investments in the developing world average 43 percent a year

(Alston et al., 2000). Since NARS in many developing countries lack the R&D capacity to

meet the need for improved technologies, international agricultural research developed to

address this gap with the CGIAR being institutionalized as a key player. The types of outputs

produced by CGIAR centres are classified in Table 1.

Table 1: Classification of the types of outputs from CGIAR centres

Types of output Examples

Technological

Embodied Germplasm, parental lines for hybrids, intermediate and finished

crop varieties, farm tools and equipment

Disembodied Soil and water management techniques, crop management

practices, laboratory methods and protocols

Knowledge

base

Managerial, institutions

and policies

Participatory approaches to plant breeding or water management,

options to reduce transaction costs in input & output markets

Databases Genomic information of crops, simulation models, panel data on

rural households, commodity situation and outlook reports

Source: Authors

4 While the Consortium controls the flow of funds from the CGIAR Fund to the centers, it has limited authority

over the centers since it is their own creation.

7

They comprise technologies, either embodied or disembodied, and knowledge base in the

form of institutional options or databases. Ekboir (2009) categorizes the products as codified

(e.g. a paper or blueprint), embedded (e.g. an improved variety) or tacit (e.g. why an

experiment failed).

The traditional primary domains of advanced research institutes (ARIs), IARCs, NARS, non-

governmental organizations (NGOs) and farmers are presented in figure 3 (Craswell and de

Vries’, 2001; cited in CGIAR, 2006). Four types5 of research are identified viz. basic,

strategic, applied and adaptive research.

The CGIAR is expected to conduct strategic and applied research while working in

partnership with ARIs in basic research, and NARS in different countries in adaptive research

to diffuse the new knowledge and adjust technologies to fit relevant ecological and production

conditions across the globe (CGIAR Science Council, 2006).

Given the global mandate of the CGIAR, the IPG concept has long been discussed and

emphasized as a criterion in setting system priorities (CGIAR Science Council, 2005) to

ensure public investment in agricultural R&D obtains maximum spillovers without crowding

out national players.

2.2. The concept of International Public Goods (IPGs) in the CGIAR

Samuelson’s (1954) pure theory of public expenditure defines the concept of public goods as

used by economists. Pure public goods are differentiated from private goods by virtue of

being non-rivalrous in consumption and non-excludable. Non-excludability implies that it is

either impossible or very costly to exclude those who do not pay for the good from utilizing it,

and once the good has been produced its benefits (or harm) accrue to everyone. The non-

rivalry property means that any one person’s or consumption of the public good has no effect

on the amount of it available for others. Most public goods are impure because they exhibit

some attributes of rivalry and excludability (Kanbur 2001). Other categories of goods are thus

identified as club goods and common pool resources (Table 2).

Public goods can be defined at the local, national, regional, international or global levels6. The

view that CGIAR centres should focus on provision of IPGs began to be clearly voiced in the

5 Basic research is designed to generate new understanding, strategic research for the solution of specific

research problems, applied research to create new technologies and adaptive research to adjust the technologies to the specific needs of a particular set of environmental conditions. 6 Local public goods are available within a district, municipality or state; national public goods only within the

borders of a country; regional public goods to two or more contiguous countries within a geographic or political environment; international public goods to two or more countries across geographic, political or continental divides; and global public goods are available to all countries.

Figure 3: Primary Domains across the research continuum of INRM. Source: CGIAR Science Council, 2006.

8

late 1990s and early 2000s (Sagasti and Timmer 2008). This concept has since been a subject

of discussion in various fora (CGIAR Science Council, 2006; 2008a). The comparative

advantage of the CGIAR in producing IPGs derives partly from the fact that private firms

have limited interest in public goods since they do not have the capacity to capture much of

the benefit through proprietary claims (Pingali and Kelley, 2007). IPGs are also characterized

by coordination problems that render them unattractive to individual governments and private

agents (Spielman, 2007).

Table 2: Classification of Economic Goods

Consumption Access

Exclusive Non-Exclusive

Rival Private (eg, food, clothing, cars) Common pool (eg, air, water, soil,

landscapes, ocean fisheries)

Non-Rival

Club/Toll (eg, INTELSAT, Suez Canal, Panama

Canal, private schools, theatres, professional

associations)

Public (eg, sunshine, national

defence, lighthouses)

Source: Ryan (2006)

Harwood (2006, pp. 381) defines IPGs in the CGIAR context as:

“Research outputs of knowledge and technology generated through strategic and applied

research that are applicable and readily accessible internationally to address generic issues

and challenges consistent with CGIAR goals”.

Ryan (2006) argues that IPG characteristics are easy to define but difficult to operationalize

within the centres. IARCs face the challenge of defining what they mean by IPGs and how to

strike a balance between focusing on these versus system goals.

2.3. Criticism of the IPG Criterion

The IPG concept has been easily applied to traditional CGIAR work, like germplasm

improvement and development of new varieties, than other types of technologies or

knowledge (Table 1). Critics consider the IPG criterion as a conceptual barrier7

with

unrealistic division of labour between research and development (CGIAR Science Council

2008a). Since obstacles to achieving impact are greatest in developing countries, IPGs should

not be a shelter to hide behind the institutional bottlenecks8. The critical argument is whether

the CGIAR is focused only on producing IPGs, and not on their application. For instance, if

seed markets are a limiting factor, would producing improved lines be a 'relevant' IPG? Some9

argue that the most significant transformations led by the CGIAR took place before the

advent of “IPGs” (CGIAR Science Council 2008a). Strong emphasis on IPGs runs the risk of

intellectualizing the CGIAR mission and distancing the system from reality.

The results of research are published in scientific journals that are available internationally.

The knowledge and technology options published are often considered as IPGs even though

they may not be relevant to other countries beyond the specific laboratories, institutions and

7 Jonathan Wooley, during Special Session on IPGs at CGIAR AGM, Maputo, Mozambique November 27, 2008

8 Gebisa Ejeta, during Special Session on IPGs at the CGIAR AGM, Maputo, Mozambique November 27, 2008

9 Gebisa Ejeta, during Special Session on IPGs at the CGIAR AGM, Maputo, Mozambique November 27, 2008

9

locations where they were developed. Since journal articles may even not be accessible to

researchers in many developing countries, they can be considered as club goods as one needs

to pay to access them even though they are not rivalrous. On the other hand, working papers

available free on the internet can be considered public goods. This calls for a more specific

definition of what constitutes an IPG output.

The type of benefit to be derived from a public good and the beneficiary group that derives it

are also important considerations. The original definition of public goods did not capture the

fact that products can be publicly available but not accessible. IPGs have to be eventually put

to use by national programs, organizations or individuals in a specific location and successful

delivery will be influenced by the institutional context including policy and political systems

(Kherallah and Kirsten, 2001). Understanding of these intermediate governance and

institutional issues should be recognized in the CGIAR as process knowledge of IPG nature

that improves efficiency and likelihood of impact.

3. Governance Challenges in Agricultural Research

Governance challenges in agricultural R&D have not been adequately addressed in theoretical

and empirical literature. In this section we discuss some of them, both at the national and

international level.

3.1. Governances Challenges in National Systems

Until the 2007-2008 world food crises, public funding for agricultural research had

diminished more so in agriculture-based countries (World Bank, 2007). In sub-Saharan Africa,

although such investments increased by 20 percent in the period 2001-2008 after two decades

of almost stagnant growth, the total investment level remained low (Lynam et al., 2012). The

average rate of return (ROR) to NARS in developing countries is much lower compared to

IARCs. In Africa, the median ROR for IARCs is 83 percent higher than for NARS, while in

Asia and Pacific the gap is 72 percent indicating the need for NARS capacity strengthening

(Von Braun et al., 2008).

The heterogeneous nature of smallholder agriculture, where a large number of small farmers

are dispersed across the country (Binswanger and Rosenzweig, 1986) presents challenges.

Higher transactions costs are incurred to access them and it becomes difficult to standardize

the extension package. Research and extension workers must exercise discretion (Pritchett &

Woolcock, 2004) and provide advice tailored to varying local conditions. Considering that a

lot of staff is required on a daily basis for programs such as extension throughout the country,

there is difficulty in monitoring and supervision. The fact that they are poorly compensated

means that they lack incentives to perform effectively leading to problems such as shirking.

Efforts to use community action are also prone to the risk of elite capture where benefits

accrue to the better-off and more powerful groups. Programs such as input provision that

involve large amounts of resources distributed under conditions that are difficult to monitor

are prone to leakage and procurement challenges (Birner, 2008). In addition, although the

situation is improving, many developing countries especially in Africa have been faced with

problems such as corruption, political instability and civil war.

10

3.2. Governances Challenges in International Agricultural Research

The CGIAR, being a large and complex multilayered institution comprising a diverse group

of political (donors), operational (centres and their research partners), and strategic (advisory

bodies) players (Kassam, 2006), lends itself to governance and co-ordination challenges.

Alston et al. (1998b) observe that “market, political, and institutional failure is pervasive

since cooperative solutions among self-interested groups are hard to sustain when free-riding

on the efforts of others appears to be a viable alternative”.

In the first quarter century of establishment, the CGIAR centres remained a loosely-knit,

decentralized structure based on voluntary contributions with no constitution, by-laws, or

written rules of procedure except a framework of informal procedural guidelines (Anderson,

1998). The centres have remained independently governed with a self-perpetuating board of

trustees (Herdt, 2012). The research policies and programs were directed by centre boards and

management. The result has been a lack of system-wide vision and strategy for impact, little

sense of overall ownership, duplicate mandates and loss of system efficiency, and complex

and cumbersome governance and lack of accountability (CGIAR Independent Review Panel,

2008). The incentive structure for scientists is also an important factor since performance and

career progression is pegged in publications in peer-reviewed journals and not on ground-

level efforts to get technologies adopted.

In the early years, centres received a large share of unrestricted funds. Over time, with lack of

coordination among investors and an increasing amount of “special project” funds, the

freedom they had in pursuing long-term priorities has reduced. Some reviews of centre

activities suggest that they continue focusing on developing IPGs from all their activities. For

example, the sixth External Program and Management Review (EPMR) of the International

Crops Research Institute for the Semi-Arid Tropics (ICRISAT) recommended that “GT-

IMPI10

(should) work on the development of hypotheses that determine the IPG potential of

ICRISAT’s downstream work on technology development, testing and adaptation” (CGIAR

Science Council, 2009). While this was an important step in appraising the international

impact of ICRISAT work, the responsibility was placed upon the socioeconomics program to

reflect on all centre activities rather than the concerned scientists from each research program.

Zeigler and Mohanty (2010) also suggest that centres should focus on producing global public

goods regardless of reduction in unrestricted funding. However, as discussed in section 2.3,

certain types of products that the CGIAR centres generate from downstream involvement,

such as policies and institutional options, may be important for agriculture-led development

but difficult to judge on the IPG dimension.

Some factors present a scope for CGIAR research agenda to be indirectly influenced by donor

countries and other organizations. First, investment patterns still reflect the dominant position

and contributions of a small group of donors (Table 3). Secondly, the UN bodies, aside from

providing financial resources that support the CGIAR science advisory body, also nominate

the members and chairperson of the ISPC for approval by the CGIAR (Herdt, 2012). Third,

legal constraints under which US grant-making foundations operate do not give them a free

10

Global Theme on Institutions, Markets, Policies and Impact (GT-IMPI) later renamed as Research program on Markets, Institutions and Policies (RP-MIP)

11

hand in directing their funds. US Internal Revenue Service (IRS) regulations instituted by the

US Congress in the tax reform act of 1969 restricted the latitude foundations had in funding

and creating new organizations (Council on Foundations, 2011). Critics also see strategic

alliances with large private sector players as a trend within the CGIAR to favour industrial

agriculture and a top-down, one-size-fits-all approach to agricultural research, which ignores

the knowledge and experience of farmers, farming communities, and indigenous people

(Sharma, 2004).

Table 3: Top Donors by Decade (Amount in US$ million)

1971-1979 1980-1989 1990-1999 2000-2010

United States 105.7 United States 412.7 World Bank 426.8 United States 650.4

World Bank 42.9 World Bank 236.0 United States 392.3 World Bank 539.9

Canada 39.3 Japan 127.9 Japan 321.9 United Kingdom 389.4

Germany 33.9 Canada 103.0 European

Commission

159.3 European

Commission

337.5

IADB* 29.2 IADB* 88.8 Switzerland 149.7 Canada 298.2

United Kingdom 23.7 Germany 87.5 Germany 146.7 BMGF** 218.6

Rockefeller

Foundation

21.2 United

Kingdom

78.1 Canada 143.6 Switzerland 198.5

Ford Foundation 20.3 UNDP 72.1 Netherlands 110.3 Netherlands 185.6

UNDP 19.3 European

Commission

67.3 United Kingdom 109.7 Japan 184.0

Sweden 15.3 Switzerland 58.5 Denmark 102.8 Germany 170.6

Italy 58.5

*Inter-American Development Bank, **Bill and Melinda Gates Foundation (Began contributing in 2004)

Source: CGIAR Fund Office, 2011.

Until the Gates Foundation came into the picture, the relative importance of private

foundations and support from national governments to the CGIAR system had weakened

(Pingali and Kelley, 2007). Private research organizations have provided minimal financial

support for a system from which they also benefit (Alston et al., 1998b). This scarcity of

funds and the need to show impact have further pushed centres down the R-D continuum

(Bertram 2006). Katyal and Mruthyunjaya (2003) observed that IARCs were underfunded and

overstretched with centres being pulled downstream and compelled to oblige to pet projects of

donors.

In 2008, a comprehensive review of the structure and activities of the CGIAR was carried out

(CGIAR Independent Review Panel, 2008). The review identified the proliferation of CGIAR

entities and programs, dispersal of research focus and complexity of decision making as

severe impediments to effectiveness. The reform process described in section 1.1 was initiated

to develop a system structure that addresses these issues. The conceptual framework

presented in the next section is an approach to analyze the appropriate institutional setup for

international agricultural research if it is to achieve intended impact in the most efficient

manner. Consideration of potential governance structures is crucial especially at this time

when the CGIAR system is undergoing a reform process.

12

4. Conceptual Framework

In this section, we explore how a conceptual framework based on transaction cost economics

can be applied in analyzing cost-effective institutional design for agricultural R&D from the

global to the local using the example of the CGIAR system.

4.1. Types of Transactions in the Agricultural R-D Spectrum and Associated Costs

CGIAR centres incur direct costs that can be directly assignable to their research to produce

specific IPGs and indirect costs that cannot be directly attributed to specific research outputs.

To apply the cost-effectiveness approach, transactions or activities along the research-impact

pathway can be categorized as follows:

Planning Transactions: This includes activities like priority setting, resource mobilization

including interaction with donors and CGIAR system level duties. They are associated with

decision costs such as the direct costs of attending meetings (e.g. for strategic planning), staff

time spent in donor relations, and payments for processes, organizational units and personnel

required to maintain the CGIAR as a system. The interface costs are higher with reduced core

funding as centres have to deal with a broader set of bilateral donors with different interests

and requiring different mobilization strategies. Cutting down on these interfacing costs will

lead to financial savings, but there is the opportunity cost regarding the quality of decisions

made. This is a trade-off that needs to be captured as making suboptimal decisions may lead

to decision-failure costs (Birner and von Braun, 2009).

Production Transactions: This includes activities such as setting up the required

infrastructure, human resources and partnerships required in order for the centres to do their

business (research), as well as the actual conducting of research. It includes set-up and

maintenance costs, research costs and costs of shared services such as research support,

financial management, procurement, personnel management project management, and

information technology. It also includes costs of maintaining and distributing CGIAR crop

genetic resources which requires sustained funding. Production failure costs may be incurred

if the research is delegated to a partner that does not have sufficient capacity.

Promotion Transactions: Subject to availability of funding and manpower, promising

technologies that have been produced and tested are promoted and disseminated to potential

beneficiaries. The process includes costs of extension, technical assistance, policy advocacy,

and training and capacity building for partners. It also includes the costs of shared services.

Monitoring and Evaluation and Reporting Transactions: Impact assessment and project

reporting activities involve costs for data collection, analysis and write-up. Again these costs

escalate when the centres have a large number of bilateral projects with small budgets that

need to be reported separately. Projects that do not budget for evaluation activities may be

unable to show accountability to donors and therefore run the risk of losing additional funding.

Transactions at the User Level: These are the activities that beneficiaries (e.g. farmers) need

to undertake to access the technologies/ knowledge. They incur some costs aside from the

cost of the products e.g. time and money used for travel or to access an extension agent.

13

The reform process of the CGIAR has implications on the above costs. Overall interface

activities of the centres are expected to diminish as the consortium serves as the main

interface with donors. The majority of research will be organized under the CRPs with an

increasing proportion of funds being mobilized and flowing through the CGIAR Fund. This

means that there will be a common monitoring and evaluation framework and reduced

number of bilateral projects that have to be reported separately. However, there might be

additional system level costs and a loss of benefits associated with direct engagement between

centres and donors.

4.2. Comparative Cost-Effectiveness of Different Governance Structures

In order to achieve an economizing result and higher total welfare from a given set of

resources, each transaction should be assigned to the actor who, in relative terms, is best at

carrying it out i.e. has a ‘comparative advantage’. For a start, we consider the above

transactions as activities being carried out by either an IARC or a NARS. According to the

discriminating alignment hypothesis, we hypothesize that low transaction intensity, asset

specificity, economies of scale and potential for spillovers are important attributes of

transactions that increase the comparative advantage (cost-effectiveness) of IARCs over

NARS in carrying out the transaction.

TCc

Participatory-Adaptive Applied Strategic Basic

TCh

$ TC

n

a

International Agricultural

Research Centers

(IARCs)

National Agricultural

Research Systems

(NARS)

Increased NARS

capacity

Transaction

costs + other

costs arising for

achieving a

specific

impact

Attributes

* Low transaction intensity

* Asset Specificity

* Economies of Scale

* Potential for spillovers

a1

TCi

0 a2

Hybrid

Structure

Figure 4: Comparative cost-effectiveness of conducting research by IARCs versus NARS. Source: Based on

Williamson (1991) and Birner and Wittmer (2004)

Hypothetical cost curves are shown in figure 4 when the above transactions are carried out by

an IARC (TCi) versus a NARS (TC

n). This is analogous to comparing a more centralized

(IARC) to a more decentralized (NARS) structure. The vertical axis indicates costs arising for

carrying out the activity; horizontal axis combination of attributes which increase the

comparative advantage of IARCs in carrying out the activity. As these attributes become more

important, IARC transaction costs increase less rapidly. This is indicated by the reduced slope

of the respective cost curve. If these attributes are not relevant (moving to the left-hand side

on the horizontal axis), NARS have a comparative advantage over IARCs. From point a1

14

onwards IARCs have a comparative advantage over NARS for performing the respective

transaction. If capacity of NARS is increased, it will be able to carry out the activity at lower

costs, indicating a downward shift of the respective cost curve (TCc). The point from which

IARCs have a comparative advantage over NARS for thus shifts from point a1 to a2.

While the above discussion considers the comparison between IARCs and NARS, we

recognize that there are many other actors in the agricultural R&D process. Most often,

IARCs work in collaboration with these partners on joint research projects with each partner

doing those types of transactions for which it has a comparative advantage. This type of

hybrid governance structure is represented in figure 4 by the cost curve TCh. This should give

higher total welfare for a given set of resources as each actor is assigned what they can carry

out most efficiently. Linking back with the discussion in section 2, the transactions under

basic and strategic research (right side of horizontal axis) have attributes of low transaction

intensity, asset specificity, economies of scale and higher potential for spillovers compared to

applied and participatory research (left side of horizontal axis).

4.3. Effect of Contextual Factors

The framework presented so far discusses what the IARCs and other actors should ideally do

along the R-D process from a normative point of view. In reality, generation and diffusion

patterns for innovations depends on complicated set of factors and stakeholder interactions.

There is a need to understand how this complexity affects the effectiveness of agricultural

R&D and the prospects of reaching the poor. The innovation systems perspective (World

Bank, 2006) promotes systems thinking in agriculture through careful coordination among

many stakeholders. The national agricultural innovation system in a country comprises the

agricultural research and education system, the interactions of bridging institutions from the

public, private and civil society sectors for technology delivery, and the ultimate users within

the agricultural value chain such as farmers, traders, and input suppliers. The system is also

influenced to a great extent by government policies related to agriculture such as property

rights, taxation and trade policies, investment in infrastructure and extension as well as the

informal socio-economic and cultural landscape.

The relationship between institutions and economic development has been well studied

(North, 1989; Nelson and Sampat, 2001; Acemoglu et. al, 2005; Butkiewicz and Yanikkaya,

2006; Keun and Byung-Yeon, 2009). In the context of agriculture, Monchi and Meng-Chun

(2008) use the six World Bank aggregate governance indicators11

to examine whether the

differences across-countries have an effect on agricultural productivity. They conclude that

given the same amounts of agricultural inputs, the same education level, and the same climate

condition, a country with better governance can generate more agricultural outputs.

Different localities may therefore show different adoption and diffusion patterns because of

differing social, cultural, institutional and political environments. For instance, the green

revolution in Asia is often seen as technological revolution. However, the success had a lot to

do with political interest of India to become food sufficient as well as willingness of the US

11

World Bank aggregate governance indicators include rule of law, control of corruption, government effectiveness, regulatory quality, voice and accountability, and political stability.

15

government and donors such as the World Bank, and Rockefeller and Ford Foundations to

provide support. C. Subramanian, the then Indian Minister for Agriculture, championed

institutional changes in the agricultural innovation system of India that enabled the green

revolution to materialize (Bhagat, 1998). Along the same lines, while the CGIAR has focused

on advancing agricultural science and its application to productivity growth, actual realization

of its mission depends on the institutional and policy context in target countries. There are

huge variations across locations and across different commodities making it difficult to apply

similar intervention strategies in different regions.

A CGIAR Science Council (2008b) report on ethical challenges identifies the responsibility

of centres depending on the context in the target country. In cases where NARS lack capacity,

they should be empowered through training programs or by performing research in

partnership them. If there are NARS with capacity12

but lack the will to engage in the problem,

the CGIAR can engage in advocacy. In some regions there might be serious constraints

simply because no other agents appear to be available. It would then be an ethical goal that

the CGIAR engages in the problem. In the process, the CGIAR should keep an eye for the

general aspects of the problem in order to build up knowledge that may be useful in other

regions.

The case where NARS are too inefficient that CGIAR centres always have a comparative

advantage is illustrated in figure 5. This would imply that the respective cost curves do not

intersect at any point regardless of how important the relevant attributes become.

$ TC

n

a

International Agricultural

Research Centers

(IARCs)

Inefficient National

Agricultural Research

Systems (NARS)

Transaction

costs + other

costs arising for

achieving a

specific

impact

Attributes

* Low transaction intensity

* Asset Specificity

* Economies of Scale

* Potential for spillovers

TCi

0

Figure 5: Comparative cost-effectiveness of conducting research by IARCs versus NARS when the later are

too inefficient. Source: Based on Williamson (1991) and Birner and Wittmer (2004)

12

Over the years, R&D capacity and institutional structures have indeed developed in some countries such as India and China, resulting in much lower costs relative to possible impacts from research.

16

Research priorities of the IARCs may also be the outcome of political decisions at the system

or centre level. Some of the conditions that might drive centres to conduct activities for which

they do not have a comparative advantage have been discussed in section 3.2. In the next

section we further look at relevant attributes and contextual factors, based on insights from

literature, and their influence on how the centres position themselves in R-D spectrum.

5. Insights from the Literature

5.1. Transaction Costs Economics

The transaction cost economics approach applies the discriminating alignment hypothesis

where transactions that differ in their attributes are aligned with governance structures that

differ in costs and competence (Williamson, 1991; Birner and Wittmer, 2004). It seeks to

identify the most cost-effective governance structures or institutional set-up for achievement

of a given outcome.

Transaction intensity has been used to characterize transactions in service delivery (Pritchett

& Woolcock, 2004; Birner and Linacre, 2008; Birner and von Braun, 2009). This attribute

indicates the (1) frequency (Williamson, 1991) and (2) spatial dispersion of transactions. For

instance, molecular breeding is less transaction intensive, compared to extension work since

the former requires fewer interactions with the farmers. We hypothesize that low transaction

intensity is an important attribute that increases the comparative advantage of IARCs over

NARS in carrying out the activity.

H1: Activities that require higher transaction intensity between the research organization and

beneficiaries can be carried out more cost-effective by delegating them from IARCs to NARS.

The capacity to exploit economies of scale in agricultural R&D at a global scale is linked to

the specialized assets the centres possess. Williamson (1991) defines asset specificity as

degree to which an asset can be redeployed to alternative uses and by alternative users

without sacrifice of productive value. He identifies six types of asset specificity; site

specificity, physical asset specificity, human-asset specificity, brand name capital, dedicated

assets, temporal specificity.

CGIAR centres have specialized physical assets in the form of research facilities and

equipment that can be used to undertake more advanced and complex lines of research

compared to NARS. The specialized knowledge gained over years by the large pool of

scientists and managers with experience in international research co-ordination and

facilitation is also a human asset. Considering that each centre has a specific mandate

(livestock, certain crops, specific agro-ecoregions e.g. semi-arid tropics or specific natural

resources e.g. water), the physical and human assets are specialized and difficult to deploy for

another purpose. For example, the genebank in a commodity centre will only contain

germplasm accessions for their mandate crops that cannot serve other crops needs in terms of

seeds. This represents a “hold-up” situation except for cases where there are across-

commodity spillovers representing benefits for multiple crops from a single genebank. It can

be hypothesized that asset specificity is an important transaction attribute that increases the

comparative advantage of IARCs over NARS.

17

H2: As asset specificity increases IARCs will incur less cost than NARS by internally carrying

out transactions that require those assets.

On the other hand, agricultural research, even for a specific crop mandate, requires a

multidisciplinary approach e.g. integrated genetic and natural resource management approach

(Twomlow et al., 2008). Some form of site specificity is required where synergy across

themes is achieved when stations are located in a “cheek-by-jowl” relation to complement

each other and economize on inventory and transportation expenses (Williamson, 1991). For

instance, centres have facilities like gene bank, molecular lab, greenhouse etc. as well as

human resources comprising molecular scientists, breeders, pathologists and agronomists who

may all be working on the same crop.

CGIAR research facilities are also located in poor developing countries representing many

agro-ecosystems. This facilitates highly contextualized, problem-driven research that is more

difficult and costly to undertake from ARIs based in developed countries (Herdt, 2012). The

CGIAR comprises a group of 64 member countries and organizations (CGIAR Fund Office,

2011) committed to addressing global development challenges through international

agricultural research. Because of its large and diverse international network, the CGIAR

system could play a bridging role in innovation networks (Ekboir, 2009). Its recognition as a

key player in international agricultural research represents some sort of brand name capital.

However, circumstances such as the social unrest experienced in Syria in 2011, which

affected ICARDA operations, illustrate the downside of investments in large infrastructure

that have to be abandoned. The challenge is to maintain flexibility under such limiting

conditions while at the same time continuing with high-tech work that requires these

resources.

5.2. Fiscal federalism literature

The fiscal federalism literature (Oates, 1972) has been developed with a focus on analyzing

decentralization levels (local versus national governments) in service provision, but the theory

can be applied to other levels. A critical consideration for research managers in the CGIAR is

whether to develop centralized research programs or adopt a more decentralized structure.

They also need to decide what R&D activities should be carried out by the centres themselves

and what should be delegated to other partners.

The appropriate regional (De Janvry and Kassam, 2001; Douthwaite et al., 2005) and

institutional structure for organizing research programs is an important decision point. Alston

et al. (1998b) observe that this should vary according to the nature of the research. The

concept of aggregation of knowledge production (Spielman, 2007) refers to the way in which

the contributions of individual countries and actors determine the total quantity of knowledge

produced, or how scarce resources for research are most effectively distributed among

countries. Aggregation addresses the issue of what the research priorities should be, where the

research should be conducted, and how its benefits should be generated.

The fiscal federalism literature identifies three important attributes of transactions, which

influence the appropriate level of decentralization: economies of scale, spillovers and

externalities, and the heterogeneity of local preferences.

18

If economies of scale in carrying out a particular kind of research are large, a more centralized

system is likely to reduce the costs. Where technical knowledge is relevant, IARCs may be

more appropriate to be able to exploit economies of scale in providing or utilizing this

knowledge. It can therefore be hypothesized that economies of scale is an important

transaction attribute that increases the comparative advantage of IARCs.

H3: IARCs have a comparative advantage over NARS in conducting activities with high

economies of scale.

Where potential for replication and inter-regional transfer of research results or spillovers is

high, research programs can be more centralized. International spillovers are likely highest for

a commodity like wheat, which is grown in relatively homogeneous production environments,

with little variability in local tastes and preferences for quality characteristics (Byerlee and

Traxler, 2001). However, if preferences for the commodity differ across countries, then it

would be more appropriate to have decentralized structures to address these local needs.

5.3. The potential for spillovers

The term “spillovers” has been used in the international agricultural research community

before the 1990’s (Davis et al., 1987). Bantilan and Davis (1991) identify three types of

spillovers, namely: across-location, across- commodity and price spillovers. Technologies are

said to have spillover potential if they have applicability to other agro-ecological locations or

for a different crop (Deb and Bantilan, 2001; Shiferaw et. al, 2004). Price spillovers occur

when the technological change at a specific location increases supply of the commodity and

changes the price at other locations through trade.

Spillovers has been used to refer to the transfer of benefits from one production environment

to another, but also to the transfer of benefits from research carried out in one country to

another. Biophysical scientists easily relate to the applicability13

across agro-ecoregions since

they are interested in estimating the potential yield of technologies in production

environments different from where the research was targeted. Research managers or policy

makers are more interested in the final welfare gains and their distribution across countries or

regions to guide priority setting and resource allocation.

Some attempts have been made to quantify spillover benefits from international agricultural

research. Maredia and Byerlee (1999) quantified spillover benefits for improved wheat

germplasm across agro-ecological boundaries. Spillovers from research in one region within a

country to another have also been estimated. For example, Alston et. al (2011) measure the

returns to the United States public agricultural research with spillover benefits to across states.

Developed country agricultural research systems also benefit from the technology spillovers

generated by the CGIAR; Brennan (1986) measured the benefits to Australian wheat breeding

programs of access to breeding materials from CIMMYT. Brennan and Bantilan (2003) and

Brennan et. al. (2003) use case studies of production spillovers to Australia from the work of

ICRISAT and the International Centre for Agricultural Research in the Dryland Areas

(ICARDA) respectively. Pardey et al. (1996) measured benefits to US wheat and rice

13

This concept is used in the elicitation of spillover indices across research domains, and the resulting matrix applied to compute the total welfare gains.

19

production from germplasm developed at CIMMYT and IRRI. Although it may seem against

the philosophy under which the CGIAR was established, these assessments of spill-ins to

developed countries can help justify use of taxpayers’ money from those countries to fund

international agricultural research.

If the spillover potential of research outputs is high, research programs and infrastructure can

be centrally set up with assurance that the products can be transferred and applied in similar

environments elsewhere. It can therefore be hypothesized that potential for spillovers is an

important attribute that increases the comparative advantage of IARCs in carrying out a

particular activity compared to NARS.

H4: It is more cost-effective to have centralized IARCs conducting activities that have high

potential for spillovers rather than decentralized NARS

Depending on whether finished products, prototypes or just knowledge is transferred, Ruttan

(1975) distinguished three phases or levels of agricultural technology transfer as materials

transfer, design transfer, and capacity transfer. While technology transfer literature has

focused on material and design transfer, it is important to understand processes that lead to

capacity transfer. Learning from actor-oriented studies (Biggs, 2008) of situations where

positive socio- economic and welfare benefits have been realized is required. However, past

analyses of spillovers have mainly considered the agro-climatic characteristics despite the fact

that there are many exceptions relating varying economic, social and political institutions

(Feder et al. 1982; Deb et al., 2004). Harwood et al. (2006) discuss the international

applicability of strategic approaches to integrated natural resource management (INRM)

research. Several examples of location-specific INRM projects that generated knowledge with

spillover potential are presented to illustrate that appropriately designed research with

development components can generate different types of IPGs.

Spillover benefits from research conducted in developed countries may at times not be

available to developing countries. Pardey and Alston (2010) attribute this to the shift in rich-

country R&D agendas away from productivity gains in food staples to other aspects such as

environmental effects, food quality, and the medical, energy, and industrial uses of

agricultural commodities. They also argue that technologies that are applicable may not be as

readily accessible because of increasing intellectual property protection of privately owned

technologies and the expanding scope and enforcement of bio-safety regulations. Finally,

those technologies that are applicable and available are likely to require more substantial local

development and adaptation.

Contextual differences across countries will, therefore, shape the uptake of technologies and

subsequently the spillover benefits generated. This calls for a development of proof of

concept hypotheses to confirm the contextual factors that influence the probability of success

in development, diffusion and impact of new technologies across countries. Based on the

discussion of contextual factors in section 4.3, we hypothesize that CGIAR centres may not

apply consistent positioning strategies because of differences in donor demands as well as

huge variations in the institutional environment across locations and commodities.

20

H5: IARCs will not apply consistent positioning strategies because of differences in donor

demands and huge variations in context across locations and commodities.

5.4. Implications of Institutional Design on Returns to Investment

Economic rates of return from research products are most commonly assessed using cost-

benefit analysis. Qualitative methods can complement quantitative measurements by

providing information on the institutional attribution, uptake, and influence of the research

output under analysis (Walker et. al, 2008).

In cases where more than one institution has been involved in development and dissemination

of a technology, attribution of net benefits presents a challenge. Since the benefits will be a

joint output of the organizations involved and the associated costs, a full description of the

role played by each actor in the R&D process (Figure 6) is required. Reducing the total costs,

including transaction costs of planning, research, technology transfer, monitoring and

evaluation and uptake, through appropriate institutional design will result in higher internal

rates of return. Aside from the estimated net benefit per unit of adoption, referred to as the

unit cost reduction (Alston et al., 1998a), the institutional choice has an effect on other

parameters including the probability of success in research, capacity to conduct adaptive

research and the actual likelihood, timing and scale of adoption.

CGIAR centres have networks and respect in the regions where they work that comes from

long experience and contribution within the regions (Harwood et. al, 2006). They can

therefore play a facilitation role for a range of institutions which will influence the adoption

parameters in two ways. First is advancing adoption so that benefits materialize earlier as

indicated in Figure 6 by the reduced time to reach maximum adoption from T1 to T2. The

other is an increase in the total level of adoption from AMax

to AMax2

.

Wider Adoption

T1 T2

AMax2

Reduced

Adoption lag

Ceiling Level

15

AMax

100%

Level of

Adoption

Innovative

Research Adoption Pathway

0 4 8

Adaptive Research

/ Development

Figure 6: The Research-Adoption Pathway

Mausch et. al (2013) use the example of benefits to different countries from groundnut

research targeting the homogenous zone with highest total benefits globally to illustrate this

point. With the adoption constraint, the benefits to India are about 1,040 million USD which

21

is the real world scenario. By lifting the adoption constraint, the welfare benefits to India

increase and are equal to an ideal world scenario at about 1,600 million USD. Since adaptive

capacity is 1, we need to focus on intervention strategies that will enhance the adoption

parameter. Before this is done, the binding constraints to adoption need to be identified and

alternative solutions sought. In order to get the maximum benefits at least possible cost, the

institutions that will carry out the identified solutions most efficiently (having a comparative

advantage), should be assigned the responsibility. In many African countries, adaptive

research capacity is also low and the reasons for this can only be understood through an

institutional analysis. This will vary not only across countries but also across crops, thus the

need for disaggregated contextual case studies. Alongside breeding, efforts can then be made

to enhance both adoption and adaptive capacity in these countries. Using the example of

Malawi, lifting only the adaptive capacity constraint will increase the benefits to the country

from 14 million USD (real world scenario) to about 35 million USD. If the adoption

constraint is lifted, the benefits further jump to about 50 million USD.

Ex-ante impact assessment studies conducted to guide priority setting and targeting decisions

take into account agro-ecological conditions, such as the length of growing period (LGP14

),

with assumptions regarding the adaptive capacity and adoption parameters. These additional

parameters depend on local conditions. Although there have been attempts to characterize

these conditions using indicators such as market access (Omamo et. al, 2006) and agricultural

R&D capacity15

, data describing them are patchy and of questionable quality in many

developing countries. In addition, these aggregate indicators do not take into account

differences between commodities in a specific country.

Where resources are not available to conduct extensive surveys, the adaptive capacity and

adoption estimates are elicited as expert judgments. These are worked out implicitly in the

experts mind based on their internalized experience in the R&D cycle in the locations of

interest. However, this knowledge is likely to be lost when they leave the organization.

Studies of the R&D process and institutional drivers of uptake and impact for different crops

in different regions will make this implicit knowledge more explicit for future use. This

would reveal the considerations that underlie expert judgments, which are often not well

documented in adoption studies.

6. Applying the Framework

The suggested framework is not designed to identify the most efficient of all possible

governance structures but rather to compare which among a selected set is the most cost-

effective taking into account the contextual conditions (Williamson, 1991). Empirical

research would provide a set of alternatives whose feasibility (administrative, fiscal, and

political) can then be assessed. Based on the above review of literature, four hypotheses are

derived on the attributes of transactions for which IARCs have a comparative advantage over

NARS (Table 4) and one based on the effect of contextual factors (H5):

14

http://www.fao.org/ag/againfo/programmes/en/lead/toolbox/Refer/AgroeZon.htm 15

http://www.asti.cgiar.org/

22

H1: Activities that require higher transaction intensity between the research organization and

beneficiaries can be carried out more cost-effective by delegating them from IARCs to NARS.

H2: As asset specificity increases IARCs will incur less cost than NARS by internally

carrying out transactions that require those assets.

H3: IARCs have a comparative advantage over NARS in conducting activities with high

economies of scale.

H4: It is more cost-effective to have centralized IARCs conducting activities that have high

potential for spillovers rather than decentralized NARS.

H5: IARCs will not apply consistent positioning strategies because of differences in donor

demands and huge variations in context across locations and commodities.

Empirical research is required to test whether these hypotheses apply for specific innovations

by collecting data on different transactions in the R&D process, relevant attributes, and

contextual factors. Transactions along the impact pathway can be elicited from researchers,

partners and beneficiaries using process-influence16

maps to understand the technology

development and uptake process. Information on costs incurred by various actors also needs

to be collected.

Table 4 summarizes the attributes of transactions with an assessment, based on the literature

reviewed in section 5, on the role that each attribute plays for each of the transactions.

Transactions with high asset specificity, economies of scale and spillover potential should be

ideally assigned to a centralized institution (IARC) while those with high transaction intensity

to a more decentralized institution (NARS or other partner). While these implications are

easier to derive for production and user level transactions, the other cases involve trade-offs

depending on context and intended objective of those activities.

For planning transactions within the CGIAR, the governance and funding structure of the

system and centres determines how strategic plans are developed. The new system under

CRPs will exploit economies of scale and reduce transaction costs of interface activities, but

the opportunity cost is the risk of driving research decisions further away from local needs.

The tools and methodologies used in priority setting and targeting such as models for

forecasting, scenario analysis and ex-ante impact assessment can be applied elsewhere

representing a spillover potential. Regarding asset specificity, while specialized physical

assets may not be required in planning, the experience of scientists and partners is important.

This expertise may at times only be applicable to specific commodities.

In the promotion stage, activities like extension, capacity building and policy advocacy

require high transaction-intensity suggesting a more decentralized organization. However, this

is not straightforward. The transaction intensity, asset specificity, economies scale and

spillover potential will depend on what is being promoted. For example, as compared to

information on new varieties, guidance on crop management practices such as tillage

operations, spacing or methods of seed placement and fertilizer application requires more

interactions with the farmers and discretion (Birner and von Braun, 2009) making it difficult

16

http://netmap.wordpress.com/process-net-map/

23

to standardize. Spillover effects can still arise from location-specific activities if there is a

conscious intention to test the techniques used and draw lessons that can be adapted for

application elsewhere e.g. on extension models, policy processes etc.

Table 4: Attributes of transactions in the agricultural R&D process

Transactions

Type of

Knowledge

Required

Relevance of Attributes

Transaction

Intensity

Asset

Specificity

Economies of

Scale

Spillover

Potential

Planning Local &

Technical

Dependent on

governance &

funding structure

Medium High Medium

Production Technical Low High High High

Promotion Local &

Technical

Dependent on

promotion

objective

Dependent on

promotion

objective

Dependent on

promotion

objective

Dependent on

promotion

objective

Monitoring /

Evaluation

& Reporting

Local &

Technical

Dependent on

monitoring

objective

Dependent on

monitoring

objective

Dependent on

monitoring

objective

Dependent on

monitoring

objective

User Level Local High Low Low Low

Source: Authors, Adapted from Birner and von Braun (2009)

At the monitoring and evaluation stage, data on performance of innovations has to be

collected through interactions along the R&D chain. Depending on resource constraints, full-

fledged surveys or expert judgments that are less transaction intensive may be used. The

nature and scope of the evaluation will determine whether specialized expertise is required.

Again, tools and methods used e.g. for ex-post impact assessment can be applied elsewhere

and so can the lessons learnt from the evaluation if properly documented.

The standard approach in empirical transaction cost economics does not require a

measurement of transaction costs (Shelanski and Klein, 1995). Empirically quantifying

attributes of transactions may be challenging since variables such as asset specificity are

difficult to measure. Although some surveys have used scaling methods (Brown and Potoski,

2003), such data are subject to the general limits of survey data since that they are based on

the stated beliefs of respondents rather than those revealed through choice. The measurements,

based on ordinal rankings, are also difficult to compare across institutions (Shelanski and

Klein, 1995). The potential for spillovers can be estimated through subjective estimates of

experts, or through objective estimates based on data reflecting applicability of a new

technology across environments and using economic surplus models to quantify potential

benefits across countries (Deb and Bantilan, 2001). Comparisons can be made through the ex-

post assessment of actual impacts. Transaction intensity can be quantified e.g. by counting the

number of visits or meetings that are usually required for a certain activity like extension.

To collect data on contextual factors, it will be useful to rely on the respective literature

(Birner and von Braun, 2009). There is a wide array of literature on the dynamics of adoption

and especially the factors that influence farmer adoption decisions. However, understanding

of “what works” in diverse circumstances and the processes driving outcomes is still far from

complete. Increased attention needs to be paid to the policy and institutional context that

shapes agricultural technology development and uptake in different countries. Research is

required to understand constraints in the entire innovation process comprising technology

24

production, supply and use of different commodities. Case studies can be carried out of

research programs that have achieved the best results as well as those that have experienced

limiting political, cultural and institutional constraints to adoption in different countries. The

synthesized lessons on contextual factors can help governments and the international

development community in targeting appropriate investments and policy reforms while

bearing in mind the local political economy.

Conclusions

Agricultural research for development needs to address a wide range of issues facing

resource-poor farmers in different countries. For the intended benefits to be realized

investments at the national, regional and international level are needed but an important

decision point is who should do what. The analysis undertaken in this paper reviews the

rationale for setting up IARCs, concerns regarding governance of agricultural research, and

the ongoing CGIAR reform process to address some of these concerns. The critical question

of how CGIAR centres should position themselves in the R-D spectrum is re-examined.

Review of discussions in literature and various fora identifies a gap in addressing the dilemma

in an objective way.

The conceptual framework presented applies transaction cost economics perspectives to

explore appropriate institutional options for carrying out activities along the R-D chain. This

is a useful basis for strategic discussions on how far downstream the CGIARs should go in

order to achieve impact from agricultural R&D most cost-effectively. Based on consideration

of the relevant attributes of transactions and contextual factors, one can make trade-offs on

whether to assign an activity to IARCs, NARS or other actor in the innovation system.

Still, it is important to note that a complicated set of factors such as availability of funds and

political pressure e.g. donor preferences will influence the decision to carry out a specific

activities. Capacities of actors along the R-D spectrum differ across locations signaling the

need for a case by case analysis of the institutional environment across countries and

commodities in order to plan suitable intervention strategies. However, priority setting for

IARCs has mainly focused on targeting of research across production environments without

careful consideration of how far down the R-D continuum to be involved based on the

institutional context. Ultimately, positioning strategies and institutional design to enable

impact from CGIAR centres should be differentiated across matrices of biophysical and

institutional conditions.

Acknowledgments

We would like to acknowledge the support of the Food Security Centre at University of

Hohenheim and by extension the German Academic Exchange Service (DAAD), the German

Federal Ministry for Economic Cooperation and Development (BMZ) and Foundation Fiat

Panis for making financial resources available for this study. The funding sources had no role

in the study design, data collection, analysis and write-up, and in the decision to submit the

article for publication. We thank Dave Hoisington, Jeff Davis and Rupsha Banerjee for their

comments on earlier versions of this paper.

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