Technological change in the salmon farming industry in Chile : using investment decision tools to model an innovation path and a framework for developing a new technology

Abstract

Salmon farming is one of Chile's main economic activities, as well as a major factor in the country's aquaculture sector, and critical to the economic growth strategies proposed by the government. Chilean salmon farming is ranked number two in the world, competing closely with Norway (number one), mainly because of Chile's sophisticated global markets. However, to maintain sustainable growth and competitiveness, innovations and technological changes are needed in the industry. I modeled the salmon industry in Chile using investment decision tools to determine the best innovation path. I also analyzed new technology that could be used to define a framework for development. The innovation path was identified by modeling a production company and applying sensitivity analysis to determine key variables. The innovation path has two parts focused on production cost: in the short term, reducing production cost for managing nets in the seawater phase; and in the long term, focusing on food items, smolts, and fish growth rates. Following the analysis, I conducted a case study of a new technology called the washing in situ system (WISS), which makes changes to the net management system for the entire fish production while reducing costs and improving the productive and sanitary conditions. In the model, the market price for utilizing the WISS technology was set at $467 per cage per month, a 15% reduction compared with the traditional system, and equivalent to $191 thousand dollar per center with a production cycle of 18 months. The maximum investment was $44 thousand dollar per production center, to generate a profit of 30%. I also calculated the tradeoff between cost and investment, set at -5.44, which helped define the direction of the development path for the proposed new solution. The methodology and models developed are powerful tools that can be used to define the best innovation path and provide a framework for developing a new technology solution that can be applied to the salmon farming industry in Chile. Valuable data was obtained as an outcome of this study, which could be used to guide innovation efforts for implementing the WISS solution throughout the aquaculture industry.