Knowledge Capital, Intangible Assets, and Leverage: Evidence from U.S. Agricultural Biotechnology Firms

Agricultural biotechnology firms are high technology companies. Firms in general, and high technology firms in particular, are a set of both assets in place and growth opportunities. This has important implications for managerial decision-making. Knowledge capital motivates exploitation of growth options, which affects firm cash flow. In turn, the level and volatility of firm cash flow influences firm financing decisions. Previous studies suggest that knowledge capital can influence both the location and capital structure of firms in the biotechnology industry. However, empirical analysis has not extended to agricultural biotechnology firms. This research helps in understanding the role of knowledge capital and other intangible assets in capital structure decisions of U.S. agricultural biotechnology firms. Quantitative results indicate that leverage is negatively related to growth and nondebt tax shields. Asset tangibility, size, profitability, and uniqueness are positively related to leverage. Using various characterizations of leverage, our models explain up to approximately 75% of the variation in leverage. Empirically generated elasticities buttress the importance of intangible assets such as knowledge capital and tax shields in capital structure choice. This analysis adds a significant new component to understanding the financing decisions of agricultural biotechnology firms.Capital structure, Agricultural biotechnology, Knowledge capital, Intangible assets, Agribusiness,

FARM BUSINESS GOALS AND COMPETITIVE ADVANTAGE

This paper investigates empirically the relationship between both farm business goals and sources of competitive advantage, and various farm and producer characteristics using new primary data collected from a survey of Ohio farmers. Results show that most farmers do not recognize sources of competitive advantage and practice strategy implementation beyond reliance on longstanding paradigms for success within the context of government farm program support and the use of traditional risk management tools. However, several key insights emerge. Farmers who engage in cost leadership strategies are more profitable. Farmers who suggest that the goal of their farming operation is to enhance profitability/efficiency use more management tools, while lifestyle farmers use fewer. Larger farmers are more apt to engage in a cost leadership strategy, while those with higher debt-to-asset ratios and those that are more livestock oriented are more likely to engage in differentiation or focus strategies. Smaller farmers and those that produce specialty or value-added crops are more likely to focus on a particular niche market. Lastly, the use of the Internet as part of the farming operation does not influence the probability of engaging in any particular business strategy. It is apparent that the government farm program has contributed to a strategic where few producers have an explicit or implicit farm business strategy beyond "working the program" and acting as price takers. Or if a strategic choice is apparent, it rests primarily with cost leadership.Farm Management,

RENTAL PREMIUMS FOR SHARE VERSUS CASH LEASES

Non-risk factors primarily determine the probability of paying positive premiums to landowners for bearing greater risk under crop share versus cash leasing arrangements. The trends toward higher cash rent levels on larger farms may indicate that higher cash rent is a bidding strategy to control additional leased acreage and perhaps to avoid management sharing with multiple landlords. Expansion of farm size may be more important than soil productivity in negotiating higher cash rents, due to potential size economies and under utilized machinery investments.Land Economics/Use,

A TRANSACTION COST ECONOMICS AND PROPERTY RIGHTS THEORY APPROACH TO FARMLAND LEASE PREFERENCES

Numerous theoretical approaches to farmland leasing contract choice have been developed with little consistent empirical support, particularly for the Corn Belt. A unique theoretical approach to explaining farmers' lease preferences is presented, using a combination of transaction cost economics and property rights theory. Results demonstrate that both transactional and certain producer characteristics are important motivators of contract choice.Land Economics/Use,

PH.D. CURRICULUM PANEL: A RECENT GRADUATE'S PERSPECTIVE

This document contains the outline of a panel discussion presentation given by the author at the 2002 WCC-72 meetings, regarding recent graduate students' perceptions of Ph.D curricula

WHO WINS AND LOSES, AND HOW WILL E-MARKETS AFFECT RURAL AMERICA? <PowerPoint Presentation>

POWERPOINT PRESENTATIO

WHO WINS AND LOSES, AND HOW WILL E-MARKETS AFFECT RURAL AMERICA? <PowerPoint Presentation>

Community/Rural/Urban Development, Marketing,

PH.D. CURRICULUM PANEL: A RECENT GRADUATE'S PERSPECTIVE

This document contains the outline of a panel discussion presentation given by the author at the 2002 WCC-72 meetings, regarding recent graduate students' perceptions of Ph.D curricula.Teaching/Communication/Extension/Profession,

Knowledge Capital, Intangible Assets, and Leverage: Evidence from U.S. Agricultural Biotechnology Firms

Agricultural biotechnology firms are high technology companies. Firms in general, and high technology firms in particular, are a set of both assets in place and growth opportunities. This has important implications for managerial decision-making. Knowledge capital motivates exploitation of growth options, which affects firm cash flow. In turn, the level and volatility of firm cash flow influences firm financing decisions. Previous studies suggest that knowledge capital can influence both the location and capital structure of firms in the biotechnology industry. However, empirical analysis has not extended to agricultural biotechnology firms. This research helps in understanding the role of knowledge capital and other intangible assets in capital structure decisions of U.S. agricultural biotechnology firms. Quantitative results indicate that leverage is negatively related to growth and nondebt tax shields. Asset tangibility, size, profitability, and uniqueness are positively related to leverage. Using various characterizations of leverage, our models explain up to approximately 75% of the variation in leverage. Empirically generated elasticities buttress the importance of intangible assets such as knowledge capital and tax shields in capital structure choice. This analysis adds a significant new component to understanding the financing decisions of agricultural biotechnology firms