Identifies and discusses the type and nature of market externalities or spillovers likely to be experienced by businesses in developing markets for new aquaculture products or in developing previously unexplored markets for existing products. Because development of new markets usually requires a substantial investment on the part of a business or businesses initially embarking on it, inability of market developers to appropriate, as a result of externalities, a substantial share of the economic returns from the successful establishment of a new aquaculture market can result in market failure.
The existence of large thresholds for the minimum level of investment in market development needed to establish a new market successfully creates further barriers for the establishment of new aquaculture markets.
Larger firms compared to smaller ones are better placed to overcome the above barriers. Furthermore, existing aquaculture businesses usually have economic advantages in development of new markets compared to new entrants. The economic establishment of new aquaculture products, and aquaculture development generally, displays a high degree of path dependence. For instance, the prior existence of complementary marketing facilities and activities can be critically important for the successful marketing of a new aquaculture product. Examples are given.
Developers of a new market may generate favourable spillovers for later business entrants because (I) they foster acceptance of the new aquaculture product by distributors, retailers and consumers; (2) they invest in the development of marketing networks, distribution channels and marketing facilities complementary to the sale of the new product, and late-comers have some open access to these 'infrastructures' and (3) developers generate some public information about the market acceptance of the new product and this is of value to late-comers.
Whether or not governments should provide assistance to early developers of markets where development is subject to market failure is discussed. Possible means for providing support are outlined.