Technovation 19 (1999) 551–560 www.elsevier.com/locate/technovation The diffusion of environmental biotechnology in Canada: adoption strategies and cost offsets Anthony Arundel a,* , Antoine Rose b a MERIT (Maastricht Economic Research Institute on Innovation and Technology), PO Box 616, 6200 MD, Maastricht, The Netherlands b Science and Technology Redesign Project, Statistics Canada, Tunney’s Pasture, Ottawa, Canada Received 14 August 1998; received in revised form 15 December 1998; accepted 2 March 1999 Abstract A 1996 study by Statistics Canada surveyed the use of 22 biotechnologies by firms with more than five million dollars (Canadian) in annual sales and in 17 sectors. Responses were received from 2010 firms or 87.5% of the survey population. The highest application rate for each of three classes of biotechnology (advanced biotechnologies including genetic engineering, environmental biotechnology, and bioculture/industrial process biotechnology) is for environmental biotechnology by firms in resource-based extraction and manufacturing sectors. The adoption rate for environmental biotechnology has increased among the cohort of 1996 resource-based firms by 9.2% per year since 1985, which is the fastest adoption rate for any of the biotechnologies. However, other results indicate that environmental biotechnology is a long way from achieving an “off-the-shelf” status. Firms require an extensive range of internal and external sources of expertise to be able to implement environmental biotechnology. One finding which could encourage the further diffusion of environmental biotechnology is that a majority of employee-weighted firms report cost savings from the adoption of environmental biotechnology to either control pollution or for use in their production processes. The exception is the wood, pulp and paper sector, where less than 14% of firms report cost savings.  1999 Elsevier Science Ltd. All rights reserved. Keywords: Diffusion; Environmental biotechnology Canada; Adoption strategies 1. Introduction In the past two decades, the development of commer- cial applications of biotechnology has grown rapidly, as shown by an increase in the number of biotechnology patents (Joly and de Looze, 1996), the number of dedi- cated biotechnology firms (DBFs) in the United States and Europe (Morrison and Giovanetti, 1998; Muller et al., 1997); and collaborative agreements between DBFs and large, diversified firms to develop biotechnology inventions (Lerner and Merges, 1998). Although most of this activity concerns the health and seeds sectors, the potential for biotechnology to become a major new gen- eric technology has been recognised for some time (Freeman and Perez, 1988). More recently, Burke and Thomas (1997) estimated that the future economic impact of biotechnology in the agro-food sector will far * Corresponding author. Tel.: + 31-43-388-3702; fax: + 31-43- 321-6518; e-mail: a.arundel@merit.unimaas.nl 0166-4972/99/$ - see front matter  1999 Elsevier Science Ltd. All rights reserved. PII:S0166-4972(99)00058-9 exceed its impact in the health sector, while other research has highlighted the possible application of biotechnology in resource-based sectors, which includes both extraction industries such as mining and forestry and resource-based manufacturing sectors such as pet- roleum refining and pulp and paper (Autio et al., 1997; CBS Taskforce, 1997). The transformation of biotechnology into a generic technology depends on the ability of firms in many dif- ferent industries to develop and implement new biotech- nology applications. This process has been extensively studied in the health sector, where commercial success has depended on the ability of firms to both master the technical complexity of biotechnology and to access complementary assets in clinical trials and marketing (Pavitt, 1990; Dodgson, 1993). Initially, these two requirements were held by different types of firms. DBFs possessed the technical expertise, but lacked the neces- sary complementary assets, while large pharmaceutical firms had extensive experience in clinical trials and mar- keting, but experienced difficulties in adapting their con-