Evolution of the Global Lysine Industry, 1960-2000
Chapter 8, pp. 237-66 in Innovation in the Food & Drink Industry, Ruth Rama (ed.). New York: Haworth Press (April 2008)
28 Pages Posted: 30 Jul 2008 Last revised: 9 Mar 2013
Date Written: July 15, 2008
Abstract
During its first three decades, the world lysine industry consisted of only three manufacturers protected by high technological barriers to entry. As the patented biotechnologies became more accessible, in the 1990s, seven other firms entered the market. Newer entrants tend to be experienced in marketing feed ingredients and have integrated their lysine fermentation facilities backward into their starch manufacturing plants. The early entrants, having neither of these advantages, are rapidly losing market share. Nevertheless, industry concentration will likely remain high because of large sunk costs in starch manufacturing, thus perpetuating the cycles of global price fixing that have already occurred at least thrice in the industry's 40 years of existence. Lysine production will migrate to tropical or subtropical areas with cheap sources of carbohydrates. Most traditional manufacturers of organic chemicals will be supplanted by starch manufacturers because of the inherent cost advantages of fermentation processes over synthetic chemistry.
Keywords: starch manufacturing, biotechnology, lysine, technological change, price fixing, sunk costs, market structure
JEL Classification: L65, L66, N6, O3
Suggested Citation: Suggested Citation
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