Agricultural Economics Research Review
Year : 2022, Volume : 35, Issue : conf
First page : ( 191) Last page : ( 192)
Print ISSN : 0971-3441. Online ISSN : 0974-0279.

Crop variety valuation: An application of Real options pricing method for licensing deals

Sharma Akriti^*, Stanishkar T S

Division of Agricultural Economics, ICAR-Indian Agricultural Research Institute, New Delhi, 110012

^*Corresponding author: aakritinankur@gmail.com

Online published on 24 March, 2023.

Abstract

A technology is a tangible or intangible asset that includes patents, copyrights, technical know-how that helps in efficient utilization of the resources. Agricultural technologies developed by institutions under NAREES are commercialized through licensing to private companies for the faster dissemination to the ultimate users. High potential of technologies calls for appropriate valuation of the technology which may be used as a base for deriving licensing fees and royalty. However, the paucity of studies was observed serving crop variety valuation in the literature. Hence, this study tried to develop a crop variety valuation model which was tested for the valuation of basmati rice variety PB 1718. To construct the model, a systematic review was carried out and an analogy was made between the variables used in existing technology valuation techniques and crop variety valuation. With the help of these variables, Real options pricing model ‘Black Scholes method’ was identified as the best fit for crop variety valuation. The model determines the value of crop variety from the perspective of the buyers. To test the model, primary data on the variables was collected by surveying 23 licensees by convergent interviewing. The variable has resulted in the valuation range of Rs 11 to 33 crore for PB 1718. The results were also tested for undervaluation by comparing the same with the cost of development of the variety. This valuation model can be applied to similar crop varieties developed by the public system for licensing purpose in order to devise suitable strategies for rapid dissemination and value realization.

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