Innovation and Entrepreneurship for Poverty Reduction: Policy and Capacity Challenges in Agriculture Andy Hall LINK-United Nations University-MERIT Learning INnovation Knowledge Policy-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 Learning INnovation Knowledge Policy-relevant Resources for Rural Innovation

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) Learning INnovation Knowledge Policy-relevant Resources for Rural Innovation

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 Learning INnovation Knowledge Policy-relevant Resources for Rural Innovation

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 Learning INnovation Knowledge Policy-relevant Resources for Rural 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? Learning INnovation Knowledge Policy-relevant Resources for Rural Innovation

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? Learning INnovation Knowledge Policy-relevant Resources for Rural Innovation

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 a Micro-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) Learning INnovation Knowledge Policy-relevant Resources for Rural Innovation

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 Learning INnovation Knowledge Policy-relevant Resources for Rural Innovation

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? Learning INnovation Knowledge Policy-relevant Resources for Rural Innovation

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? Learning INnovation Knowledge Policy-relevant Resources for Rural Innovation

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 Learning INnovation Knowledge Policy-relevant Resources for Rural Innovation

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 with strong growth Export orientation Traditional sector in transformation Employment potential 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 Cassava processing X X Colombia Cassava processing X X Cut flowers X X X Learning INnovation Knowledge Policy-relevant Resources for Rural Innovation

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 Learning INnovation Knowledge Policy-relevant Resources for Rural Innovation

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

Evolving towards sustainable dynamics Pre-planned phase Foundation phase Emergence phase Pilot phase 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 Learning INnovation Knowledge Policy-relevant Resources for Rural Innovation

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 Learning INnovation Knowledge Policy-relevant Resources for Rural Innovation

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. Learning INnovation Knowledge Policy-relevant Resources for Rural Innovation