Innovation and Entrepreneurship for Poverty Reduction: Policy and Capacity Challenges in Agriculture

Innovation and Entrepreneurship for Poverty Reduction: Policy and Capacity Challenges in Agriculture

Andy Hall

LINK-United Nations University-MERIT

Learning INnovation KnowledgePolicy-relevant Resources for Rural Innovation

Renewed Development Policy Interest in Agriculture

• Agriculture is still a key economic sector• The poor still largely located in rural areas• Frontline in coping with climate change• 2008 World Development Report (WDR) and IAASTD

(2008) both conclude that agricultural development through innovation will be central to 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 is 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 cutflower industry through Dutch investment; the Ugandan Nile perch fisheries cluster; Kenyan horticultural export sector; tomato processing by Pepsico and mango processing by Coca-Cola India using farmer networks; Hyderabad agri-business park

• And many, many more


Interesting….. but is it really Agriculture?

• Success is usually discussed in terms of the extent to which the sector or enterprise thrives during or overcomes shock

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

• But what about the rest of agriculture?


Agriculture as a Sector of Micro-entrepreneurs

• The key difference between agriculture and 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 sellers

• Very diverse composition• Largely an informal sector; makes policy support and

regulation more difficult• How to build innovation capacity with micro-

entrepreneurs?


Measures to deal with aMicro-enterprise-based Sector

• Cooperatives: Collective input and technology access and marketing– Notable successes, but wider spread failures

• 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 smallscale palm oil processing enterprises. However, flexibility and entrepreneurial capacities needed to innovate and cope with changing palm oil markets were 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 an ethically-traded whole-food market

• Used a network of existing farmers groups established for social development purposes

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

• The two companies’ entrepreneurship embedded farmers into a 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 uptake limited

• In Benin a number of rice millers recognised that there was an opportunity to sell the new rice as it was of good quality. However, the lack of rice seed supply prevented uptake by farmers. Also 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 poverty reduction? What are the underlying 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 micro-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 of using 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 Studies

Country Sector Niche withstrong growth

Exportorientation

Traditionalsector in

transformation

Employmentpotential

Bangla-desh

Shrimp X X X

Food processing X X X

India Medicinal plants X X X X

Vanilla X X

Ghana Pineapple X X

Cassavaprocessing

X X

Colombia Cassavaprocessing

X X

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 they 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-planned phase

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

changing threats 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 helping 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


LINK is a specialist network of regional innovation policy studies hubs established by the United Nations University-MERIT (UNU-MERIT)

and the Food and Agriculture Organization of the United Nations (FAO) to strengthen the interface between rural innovation studies,

policy and practice and to promote North-South and South-South learning on rural innovation.


Technology

Innovation and Entrepreneurship for Poverty Reduction: Policy and Capacity Challenges in Agriculture