Trade and Development Board Investment, Enterprise and Development Commission Multi-year expert meeting on enterprise development policies and capacity-building in science, technology and innovation Geneva, 20–22 January 2009

PAPER SUBMITTED TO THE EXPERT MEETING*

Innovation and Entrepreneurship for poverty reduction:

policy and capacity challenges in agriculture

By

Mr. Andy Hall

Senior researcher, UNU-MERIT

________________ * The views expressed are those of the author and do not necessarily reflect the views of UNCTAD.

Innovation and Entrepreneurship for poverty

reduction: policy and capacity challenges in

agriculture..

Andy Hall, LINK Coordinator, UNU MERIT

Renewed development policy interest in agriculture

• Agriculture still a key economic sector.• The poor still largely located in rural areas.• Front line in coping with climate change• 2008 WDR and IAASTD (2008) both conclude

that agricultural development through innovation will be central reducing poverty.

• IAASTD stressed that a research and technology led approach to innovation is no longer an option for the contemporary multi-functional agricultural sector

The new innovation paradigm• Agriculture like other sectors. Innovation and

innovation capacity characterised by networks or systems to mobilise knowledge and use it new ways (OI, IS, mode 2)

• Diversity of innovation arrangements– Research intensive for innovation process with high

technological content (animal vaccines) . – Peer intensive for innovation process with high

organisational and design content (food standard / quality conformity).

– User intensive for innovation process to match products with consumer niches (plant breeding / natural resource management).

Challenges of the new paradigm• calls into question the main policy instrument for

agricultural innovation: public investment in research. Links to other knowledge also important.

• challenges routine ways of working across the whole agricultural development architecture, particularly the reliance on specialised technology transfer services – agricultural extension.

• AES need to become innovation brokers to help farmers link to market opportunities and to sources of information and inputs to grasp those opportunities.

New models for promoting agricultural innovation

• Models that promote innovation in manufacturing sector can be seen in agriculture (clustering; FDI; new forms of partnerships).

• Ethiopian cut flower industry through Dutch investment; the Ugandan Nile perch fisheries cluster; Kenyan horticultural export sector; tomato processing by Pesico and mango processing by Coca-cola India using farmer netwroks; Hyderabad agri-business park.

• And many many more

Interesting, but is it really agriculture?

• Success is usually discussed into terms of the extent to which the sector or enterprise thrives or over comes shock.

• While there is certainly employment creation gains from such cases, impact on poverty reduction are much harder to ascertain from published accounts of these case.

• But what about the rest of agriculture?

Agriculture as a sector of mirco-entrepreneurs

• The key difference with the manufacturing sector is that agriculture is a sector made up of very large numbers of micro-entrepreneurs. Even in agro-process; e.g. street food seller.

• Very diverse composition.• Largely an informal sector; makes policy

support and regulation more difficult.• How to build innovation capacity with mirco-

entrepreneurs?

Measures to deal with micro-enterprise based sector.

• Cooperatives: collective input and technology access and marketing: Notable successes, but more wider spread failure.

• Experiments with other collective models with a variety of institutional arrangements in the category of farmer operated enterprises (FOE)

• E.g. Techno-Serve in Ghana established village based small scale palm oil processing enterprises. However flexibility and entrepreneurial capacities needed to innovate and cope with changing palm oil markets was absent: technical and capacity lock ins.

Two opportunity driven models of innovation and entrepreneurships.

• Fruits of the Nile. Link up between a Ugandan and UK companies to serve ethically traded whole-food market.

• Used a new work of existing farmers groups established for social development purposes.

• Used technical assistance from local research institute. Information links to UK market allowed adjustments to products and quality and qualities produced.

• The two companies entrepreneurship embedded farmers into wider systems that allowed continuous innovation

The new rice seed for Africa.• New high yielding rice variety for West Africa: NERICA.• Large scale popularisation of new seeds, but up take

limited.• In Benin a number of rice millers recognised that there

was an opportunity for selling the new rice as it was good quality. However saw that lack of rice seed supply prevented up take by farmers. Also saw that seed production was limited by credit.

• Mobilised political and other support and other links with public and private players. Bulked up seed and NERICA production and consumption took off.

• Self organising system of innovation?

Remaining questions for policy• What should agricultural innovation capacity look like in

the contemporary sense and how can research-derived knowledge resources be better embedded?

• What models of FOE really work, particularly for a poverty reduction? What are the under lying principles of success and how can these be replicated, or taken to scale?

• Similarly which value chain related or FDI related models of agricultural innovation are useful? Building innovation capacity or accessing resources and cheap labour?

• If entrepreneurship is the main driver of agricultural innovation, how can this best be supported, nurtured and enabled in a largely informal sector of mirco-entrepreneurs?

Policy options• Policy measures that strengthen the innovation

enabling environment also apply to agriculture: (strengthening the climate for business; patterns of higher education; availability of credit; promotion of public private sector partnership; better coherence between different policy domains; sector coordinating bodies.)

• Identify promising new opportunity driven initiatives and innovations that have potential for economic development and poverty reduction.

• Find ways to use public policy and resources to support these initiatives, strengthening their relevance to public policy goals and expand their scale. Recommendation of World Bank study.

Case studiesCountry Sector Niche with

strong growthExport

orientationTraditionalsector in

transformation

Employmentpotential

Shrimp X X XBangla-desh

Food processing X X X

Medicinal plants X X X XIndiaVanilla X X

Pineapple X XGhana

Cassavaprocessing

X X

Cassavaprocessing

X XColombia

Cut flowers X X X

Two Main patterns

• Usually. Sub-sectors emerge because entrepreneurs identify new market opportunities and innovate to gain market access. Subsequently falter as can’t continuously innovate in dynamic markets

• Occasionally. Research interventions promote innovation when organised in ways that promote interaction and or as part of integrated sector support.

Pre-plannedphase

Foundation phase

Emergence phase

Pilotphase

Stagnation phase

Dynamic system of innovation phase

Nascent phase

Initiating interventions

Experimental interventions

Interventions to nurture success

Remedial interventions

Building on success interventions

Maintenance interventions

Market and other opportunities

Rapidly changingthreats and opportunities

Orchestrated trajectory Opportunity-driven trajectory

A continuously evolving subsector delivering economic growth and social development

Evolving towards

sustainable dynamics

Finally• In the agricultural sector if public policy

was better at picking winners and help them do what they do best, agricultural development could proceed much more quickly.

• The final challenge for policy therefore must be for it to strengthen its intelligence gathering capacity to better understand promising developments in the (often) informal sector and in agriculture and rural development more generally.