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Bam2013 pakistan presentation

  1. 1. The marble mining industry in NW Pakistan: an analysis of low-tech innovation in a developing country Muhammad Nouman, IMSciences, Peshawar Lorraine Warren, university of Southampton BAM Conference, Liverpool, September 2013
  2. 2. Background • Origins in split-site agreement with IMSciences, Peshawar INSPIRE project, http://ihe- pakistan.blogspot.co.uk/2012/09/supporting-smes-in- khyber-pakhtunkhwa.html, funded by British Council, Higher Education Commission in Pakistan (60k) • TEDxSouthampton http://www.youtube.com/watch? v=ia2uLqif-_M
  3. 3. INSPIRE • www.blog.soton.ac.uk/inspire • www.soton.ac.uk/inspire • Research – International Research Group • Project – SME Development, extend ongoing work • 2 split site students, Javed Iqbal and Adnan Javed • International Research Methods Seminar Series • Curriculum Development • Outreach • Exchanges • International profile -> Going Global (Dubai) (British Council, Internationalising Higher Education), Conference in Dubai in 2014
  4. 4. Research Aim, Objectives and Justification • Pakistan government wish to improve performance in SME sector • Low innovation, high natural resource wastage • RO1: To understand the phenomenon of innovation within a low-technology sector (the marble industry in NWP), in terms of its constituents, key contextual factors stakeholders and actors, and • RO2: through better understanding of the industry, develop recommendations for improvement, in line with Pakistan’s national policy.
  5. 5. Setting the Context The North-West Regions (N-WFP & FATA) of Pakistan
  6. 6. Setting the Context The North-West Regions of Pakistan
  7. 7. Setting the Context • What is Marble Stone? • Two sub-sectors (a) marble mining & (b) marble processing • Up to 70 % resource wastage due to poor mining and processing technologies; exports are only 10% of total production, $ 60 – 70 million losses per year in exports only (SMEDA, 2007; IMS, 2007) • Sector characterized by ‘low-technologies’ • ‘Non-dimensional’ stone extracted through indiscriminate blasting • One of Pakistan’s three SME-based industries with ‘new potential for growth’ (Zia, 2007) • A sector characterized by competitive disadvantage where policy/institutional actions can have the greatest positive impact (WB, 2006) The Marble Sector of North-West Pakistan A Marble Mine Blocks being transported from mine Non-dimensional block/stone being shifted in processing factory using mechanical crane
  8. 8. Setting the Context In order for the marble sector to improve and prosper we need to find out and explain how firms in the sector can innovate. What is the current situation? How can things improve? What needs to be done to reduce wastage and increase profitability? Improvement of the sector in line with a regional development agenda for the north-west regions of Pakistan that seeks to enhance local industries by exploiting the area’s natural resources. A horizontal marble cutting machine A worker operating on vertical cutter A vertical marble cutting machine Thin marble tiles Marble slabs used in flooring & stairs Marble slab with rough edges Mosaic decorative items
  9. 9. Reviewing Literature: The Approach 1. Placing Low-Tech (LT) on the Innovation Landscape 2. Developing the Conceptual Framework 3. Innovation in LT & LMT Sectors: Disciplinary Debates and Key Insights
  10. 10. Reviewing Literature: Placing Low-Tech on the Innovation Landscape • Growing criticism of ‘high-tech myopia’ (von Tunzelmann & Acha, 2005) • Even in developed countries low-tech (LT) and low- and medium-tech (LMT) comprise dominant portion of the economy (more than 90% of growth output), economic growth not possible only through HT innovation (Robertson et al. 2009; Hirsch-Kriensen & Jacobson, 2008; Bender, 2004) • LT (R&D intensity 0 – 0.9 %), LMT (R&D intensity 0.9 – 5 %); LT the ‘forgotten sector’ (Hirsch-Kreinsen, 2008a) • Innovation also possible in LT and LMT sectors; incremental product improvements, customer focus, ‘optimisation’ of processing technologies, tacit & experiential knowledge (Heidenreich, 2009), design, advance machinery, training, external sources (Santamaria et al., 2009) • LT sectors mostly comprise of SMEs, have incremental innovation, process innovation more common (Hirsch-Kreinsen, 2008b)
  11. 11. • Difficult to develop conclusive list of innovation determinants; Innovation type, industry sector, firm size & firm’s context main causes of variation; Process & incremental innovation more common (Souitaris, 2002, 1999; Wolfe, 1994; Pavitt et al., 1989) • Various characteristics of owner/manager influence innovation indirectly through mediating role of entrepreneurial processes within firm (Entrialgo et al., 2000); more direct influence (Akgun et al., 2009); very limited insights on individual-level as compared to firm-level and contextual determinants • More studies needed from SI perspective to understand determinants (Edquist, 2005) • Country-specific institutional frameworks affect labour markets thus influencing relative affect of innovation determinants (Casper & Whitley, 2004) • More research needed to understand role of institutions (Faulkner, 2009; Malerba & Orsenigo, 1995) Reviewing Literature: Innovation in LT & LMT Sectors: Disciplinary Debates & Key Insights
  12. 12. Reviewing Literature: Developing the Conceptual Framework • Innovation approaches; milieu, networks, clusters, systems (Todtling et al. 2009) • Systems of Innovation (SI) – focus on relationships/interactions amongst firms, other organizations & institutions; include determinants of innovation including social, political, economic, institutional, organizational and other factors (Edquist, 2005, 1997; Freeman, 1987) • SI – National (NSI) (Nelson, 1993; Lundvall, 1992); Regional (RSI) (Asheim & Gertler, 2005; Cooke, 2001, 1992); Sectoral (SSI) (Malerba, 2005, 2004, 2002; Breschi & Malerba, 1997) • Sector: ‘a set of activities that are unified by some linked product groups for a given or emerging demand and which share some common knowledge. Firms in the sector have commonalities and at the same time are heterogeneous’ (Malerba, 2005, pp. 385) • Elements & Structure of SSI: Products, agents (firms & non-firms), knowledge & learning processes, technologies, demand, institutions, interactions (Malerba, 2004)
  13. 13. MAJOR LT & LMT SECTORS STUDIED (Predominantly Manufacturing) COUNTRY CONTEXTS Agriculture, Food, Beverages, Chemical, Machinery and Equipment, Pharmaceuticals, Building Materials, Biotechnology, Semiconductor, Mineral (Metallic), Mineral (Non-Metallic), Steel, Metal Packaging, Wood, Medical Equipment, Rubber, Leather, Plastic, Paper, Food Machinery, Construction, Textile, Electronics, Tobacco, Housing, Furniture, Ferrous Ore mining, Non-Ferrous Ore Mining, Glass, Footwear, Printing/Publishing, By-Products, Graphic Arts, Bedding Mattress, Mechanical Engineering, Ceramic, Electronic Games, Games Software, Integrated Circuit, Vehicles Equipment, Transport, Fertilizer, Office Equipment United Kingdom, Germany, France, Belgium, Portugal, Austria, Italy, Norway, Sweden, the Netherlands, Spain, Denmark, Finland, Ireland, Greece, Australia, USA, Canada, Brazil, Chile, Mexico, China, Japan, Korea, Taiwan, Turkey, India, Kazakhstan, Vietnam, Jamaica o Many sectors studied including minerals. o No exclusive research on marble. o Dominant focus on developed country contexts (Europe, USA, Canada, South America, Far East). o Very limited work in developing country context. Reviewing Literature: Innovation in LT & LMT Sectors: Disciplinary Debates & Key Insights
  14. 14. The Conceptual Framework Sectoral System of Innovation (SSI) SSI Elements SSI Structure (Interactions) Firm Non-Firm Knowledgebase Technologies Learning ProcessesDemand Institutions Firm Owner or Manager or Entrepreneur Representative of Non-Firm Organization Micro-Individual Level Micro-Individual Level Meso-Firm Level Meso-Firm Level Macro-Contextual Level Macro-Contextual Level Levels within the Marble Sector • Traditional SSI approach mainly focuses on firms & their context • Marble companies are small firms with limited resources • Owner/manager a key individual • Studying his role extremely important also in order to have a better understanding of innovation
  15. 15. Why Sectoral System of Innovation (SSI)? • Innovation at the centre of the system • More holistic – includes wider array of determinants • Focus on non-linear nature of innovation – an essential characteristic of LT innovations, focus on interactions/relationships • Greater focus on understanding role of institutions (national, regional, sectoral components) • Focus on ‘product groups’; Focus on firm • Suitable for studying innovation within a sector or industry • More flexible – ‘level of aggregation’ concept used to determine sector boundaries & level of analysis applied by researcher (Malerba, 2004) • Focuses on industry/sector-specific nature of technological regimes; appropriate for studying innovation in LT/LMT sectors (Evangelista and Mastrostefano, 2006) • Downside = neglect of entrepreneur/individual (Radosevic)
  16. 16. Deciding the Methodology & Methods Case Study – Multiple (Two) Case Design (Embedded Type 4) CONTEXT Peshawar-Mohmand Sectoral System Product groups, technologies, knowledgebase, learning processes, demand, institutions, non-firms, interactions/relationships CASE 1 PESHAWAR & MOHMAND AGENCY Unit of Observation: Owner/Manager/Entrepreneur Embedded Unit of Analysis 1 ‘Marble Mining Firm’ Embedded Unit of Analysis 2 ‘Marble Processing Firm’ CONTEXT Buner Sectoral System Product groups, technologies, knowledgebase, learning processes, demand, institutions, non-firms, interactions/relationships CASE 2 BUNER Unit of Observation: Owner/Manager/Entrepreneur Embedded Unit of Analysis 1 ‘Marble Mining Firm’ Embedded Unit of Analysis 2 ‘Marble Processing Firm’ A Marble Sector Processing Unit Processing Unit Mining UnitMining Unit Mining UnitMining Unit Mining UnitMining Unit SupplierSupplier Intermediary or Middleman Intermediary or Middleman Public-oriented Sector Support Organization Public-oriented Sector Support Organization Private Sector Support Organization Private Sector Support Organization Mining UnitMining Unit Other Stakeholder Organization Other Stakeholder Organization Processing Unit Processing Unit Processing Unit Processing Unit Processing Unit Processing Unit SupplierSupplier Intermediary or Middleman Intermediary or Middleman SupplierSupplier Public-oriented Sector Support Organization Public-oriented Sector Support Organization
  17. 17. Deciding the Methodology & Methods Data Collection (using Case Study Protocol) & Analysis PHASE STATUSPreliminary Phase: Semi-structured In-depth Interviews (April – May 2009) Sample & Number of Respondents (Purposive Sampling - Heterogeneous) Total, Location, Time/Interview •Owner/Manager Processing Unit (4 Interviews; 2+2, Case1 & Case2) •Owner/Manager Mining Unit (3 Interviews; 1+2, Case1 & Case2) •Supplier & Middleman/Distributor (2 Interviews; 1 supplier+1 distributor for Case1&2) •Sector Expert (1 Interview from consultant/academician) •Representative of Support Organization (2 Interviews; 1 SMEDA, 1 PASDEC) 12 Interviews, Peshawar (Warsak Rd., Industrial Estate, GT Road, Cantonment, Hayatabad), Buner (main city), Islamabad (main city) (1 - 1.5 hrs) Complete Data Analysis – Step I: Create Case Study Database, Translate & Transcribe Interviews, Conduct Initial Analysis, Inform & Formulate Structured Interviews & Questionnaires (June – December 2009) Complete Build-Up Phase: Questionnaires and Structured Interviews (January – March 2010) Sample & Number of Respondents (Purposive Sampling – Homogeneous within each Sub-sector) Total, Location, Time/Interview •Owner/Manager Processing Unit (35+35 Questionnaires, Case1 & Case2) •Owner/Manager Mining Unit (6+12 Structured Interviews, Case 1 & Case 2) 70 Questionnaires, 18 Interviews Peshawar (Warsak Rd., Industrial Estate, GT Road), Buner (main city, Chamla & Sunigaram, Dewanbaba, Karakar) (35 - 50 mins) Complete Data Analysis – Step II: Further Build Case Study Database, Conduct Data Analysis (April – July 2010) Complete Closing Phase: Structured Interviews (August – September 2010) Sample & Number of Respondents (Purposive Sampling – Heterogeneous) Total, Location, Time/Interview Owner/Manager of Processing Unit (2 Interviews; 1+1. Case 1 & Case 2) Owner/Manager of Mining Unit (1 Interview, Case 2) Supplier/Middleman/Distributor (1 Interview) Sector Expert (1 Interview) 6 Interviews, Peshawar (Warsak Rd., Hayatabad, Cantonment), Buner (main city) (35 - 50 mins) Complete
  18. 18. Deciding the Methodology & Methods • Creating Codes (influence from Research Questions & Conceptual Framework) • Splitting and Splicing • Descriptive Codes, assigning units of data, Pattern Coding • Memos Description Code Research Question Existing Marble Product Ex-Prod RQ1.1.1 Existing Marble Process Ex-Proc RQ1.1.2 Product Innovation Prod-Inn RQ1.2.1 Marketing Innovation Mark-Inn RQ1.2.3 Informal Learning Process Inf-L-Proc RQ2.3.2 Formal institution Form-Inst RQ2.4.1 Interaction b/w firm & non-firm Int-F-NF RQ3.1 Individual Innovation Determinant Ind-Inn-Det RQ3.5.1 Firm Innovation Determinant F-Inn-Det RQ3.5.2 FORMAT OF CASE STUDY REPORT CASE TITLE 1. Introduction 2. General Scenario in the Sector: Firm and non-firm context (RQ1.1) I. Nature and types of products II. Nature of production processes III. Nature of marketing practices IV. Nature of organizational structure V. Role of stakeholder organizations 3. Existing Innovation Scenario in the Sector (RQ1.2) I. Manifestations of innovation: Firm-context 4. The Sectoral System of Innovation: Elements I. Role of Agents (RQ2.1) A. Individuals & Firms A1.Mining Units A2. Processing Units B. Non-Firms B1.Suppliers B2. Middlemen/Distributor B3. Sector Support Organization II. Nature of Knowledge and Technologies (RQ2.2) III. Learning Processes (RQ2.3) IV. Nature of Demand (RQ2.3) V. Institutions and their role (RQ2.4) 5. The Sectoral System of Innovation: Structure I. Interactions amongst Firms and Non-Firms (RQ3.1) II. Interactions amongst Firms and Institutions (RQ3.2) III. Interactions amongst Firms and Knowledge and Technologies (RQ3.3) IV. Interactions amongst Firms and Learning Processes (RQ3.4) V. Interactions amongst Firms and Demand (RQ3.4) VI. Logic Models and Discussions (RQ3.1-RQ3.4) 6. Determinants of Innovation in the LT Sector: Categorization (RQ3.5) and Relative Importance (RQ3.6) I. Logic Models and Discussions (RQ3.5-3.6) 7. Concluding Thoughts Example (Yin, 2003; Miles & Huberman, 1994; Dey, 1993) • Replication Logic • Matrices & Networks, Logic Models • Within-Case Displays • Cross-Case Displays & Analysis • Two Case Study Reports (Case 1 & 2)
  19. 19. Outcomes 1 • Dependence of processing sub-sector on mining sub-sector • All characteristics of SSI (elements & structure) found in the marble sector • Products: More than 20 main varieties of stone • Mining Phase: Irregularly shaped boulders & blocks, cracks • Processing Phase: Slabs, tiles, decorative items, mosaic, flooring pebbles ‘chips’, poor quality (rough edges, small cracks) • Processes: Mining – indiscriminate blasting, limited use of mechanized extraction (loader & extractor), no wire cutting, no dimensional stone extraction • Processing – cranes for off-loading, vertical & horizontal cutters, some gang saws, polishers • Marketing: Most finished product does not meet international standards, focus on domestic market, better understanding of local customer needs but not the case for international markets, limited evidence of packaging & labelling • Organization: typical small enterprise structure (mostly 1 owner/manager, 10- 12 employees, informal delegation of authority & responsibilities), leasing in the case of mines
  20. 20. Outcomes 2 Zero R&D intensity Context-specific manifestation of innovation Incremental product & process innovation only, no significant improvements (inline with LT sector characteristics) Some marketing innovation, targeting new markets at national level (mainly Punjab), no international focus No innovation at firm’s organizational level Innovation supplier-driven (in line with Pavitt’s taxonomy) especially supply of modern technology, improved imported machinery and better quality / dimensional raw marble Process innovation strongly influencing product innovation Innovation in mining sub-sector (excavation processes) strongly influencing innovation in processing sub-sector, importance of sub-sectoral linkages
  21. 21. Outcomes 3 Technology changes very slow within the sector, most technologies in use since last 15-20 years Knowledge search common at individual level (owner/manager) but not at firm level Technologies are spillovers from LMT sectors like locomotives Weak absorptive capacity due to unskilled workers Knowledge of domestic market only & not international market, knowledge gained informally by learning about local customer’s requirements/tastes Incremental knowledge accumulation but formal on-job training non-existent Low knowledge appropriability as product too simple & easy to copy by competitor Technologies used with a priority for production efficiency, compromise on product quality
  22. 22. Outcomes 4 Formal National Formal Regional Formal Sectoral Weakening Effects of Formal Institutions Policy Inconsistency Marble Sector Strong Informal Institutions Lack of Clarity Weak Match
  23. 23. •Risk-taking by owner/manager •Innovations set by other businesses as examples to follow •Skill-level and training of worker (s) •Education and awareness of owner/manager •Owner’s formal business experience •Owner’s perception of and response to change •Owner’s satisfaction level with current sales/business performance •Owner’s focus on day-to-day survival versus long-term planning •Owner’s perception about profitability of innovations •Risk-taking by owner/manager •Innovations set by other businesses as examples to follow •Skill-level and training of worker (s) •Education and awareness of owner/manager •Owner’s formal business experience •Owner’s perception of and response to change •Owner’s satisfaction level with current sales/business performance •Owner’s focus on day-to-day survival versus long-term planning •Owner’s perception about profitability of innovations •Stone/material wastage during blasting and cutting processes •Locally manufactured machinery resulting in quality problems during processing •Equipment/machinery maintenance •Availability of finances and low profit margins •Small size of business •Nature of formal business planning and implementation •Lack of ownership due to separation between mine lease holder and mine operator/manager •Stone/material wastage during blasting and cutting processes •Locally manufactured machinery resulting in quality problems during processing •Equipment/machinery maintenance •Availability of finances and low profit margins •Small size of business •Nature of formal business planning and implementation •Lack of ownership due to separation between mine lease holder and mine operator/manager •Nature of excavated marble (dimensional vs. irregularly shaped stone blocks) •Uniqueness of marble stone varieties •Nature of linkages among mining and processing sub-sectors/firms •Availability or otherwise of machinery (local and/or imported) and with features that allow flexibility in product designs •Quality of available machinery components such as blades, cutters, others •Presence of experts/technicians in the market who can install machinery properly •Infrastructure support such as electricity, roads •Leasing and loan services from banks and other organizations •Quality issues with excavated stone (impurities, hardness) •Transportation costs of shipping stones from mines to processing units •Cost of fuel for mining units and electricity/taxes for processing units •Nature of excavated marble (dimensional vs. irregularly shaped stone blocks) •Uniqueness of marble stone varieties •Nature of linkages among mining and processing sub-sectors/firms •Availability or otherwise of machinery (local and/or imported) and with features that allow flexibility in product designs •Quality of available machinery components such as blades, cutters, others •Presence of experts/technicians in the market who can install machinery properly •Infrastructure support such as electricity, roads •Leasing and loan services from banks and other organizations •Quality issues with excavated stone (impurities, hardness) •Transportation costs of shipping stones from mines to processing units •Cost of fuel for mining units and electricity/taxes for processing units •Access (direct/indirect) to national & international markets •Awareness & knowledge of international customer preference •Nature of product demand in local market (stagnant vs. dynamic) •Demand for substitutes like ceramic & porcelain products •Demand for marble products from Balochistan region of Pakistan & China in national & international markets •Access (direct/indirect) to national & international markets •Awareness & knowledge of international customer preference •Nature of product demand in local market (stagnant vs. dynamic) •Demand for substitutes like ceramic & porcelain products •Demand for marble products from Balochistan region of Pakistan & China in national & international markets •Role of marble support organizations (government & private sector) •Role of marble union or association •Interactions among firms, non-firms & formal institutions •Market distortion due to presence of non-professional individuals •Geographical location of business and distance from markets •Nature of informal institutions (collectivist culture, social pressures, tribal social system) •Complexity of banks’ lending procedures •Exploitative role of middlemen fetching greater profit margins •Nature of application of formal institutional frameworks by government regulatory bodies •Uncertainty about law & order, economic situation & government credibility •Role of marble support organizations (government & private sector) •Role of marble union or association •Interactions among firms, non-firms & formal institutions •Market distortion due to presence of non-professional individuals •Geographical location of business and distance from markets •Nature of informal institutions (collectivist culture, social pressures, tribal social system) •Complexity of banks’ lending procedures •Exploitative role of middlemen fetching greater profit margins •Nature of application of formal institutional frameworks by government regulatory bodies •Uncertainty about law & order, economic situation & government credibility Micro-Individual Level Meso-Firm Level Macro-Contextual Level Others Demand-oriented Supply-oriented *Internal Determinants *Contextual Determinants Schematically 87 Determinants (46 processing, 41 mining) of LT Innovation in marble sector of north-west Pakistan *Becheikh et al. (2006)
  24. 24. Continuing… • At the micro-level, no overarching climate for innovation in the industry in the community of firm owners; though entrepreneurial individuals can be influential, overall, there is a lack of role models • At the meso-level, limited and informal interactions between firms in relation to knowledge and learning processes • Meso-micro interactions between individuals and firms are role- dominated, often with weak connections between investment in innovation and reward • At the macro-level, weak institutions combined with sector support organisations with a lack of trust, direction and purpose within a conflictual region result in non-existent access to international markets • Macro-meso interactions result in the inability of firms to trigger new demand and weak knowledge creation and learning.
  25. 25. Conclusion • The concept of innovation in a low-technology sector has been poorly understood especially within the context of a developing country • This research addresses the lack of an exclusive and all-encompassing SSI perspective that focuses on innovation in a low-technology sector and integrates conceptual/theoretical aspects of SSI with empirical work conducted in a developing country • The SSI approach has traditionally focused on the role of firms and their context explained through sectoral elements and structure. However, the understanding of sectoral structures is still weak. Also, using micro-meso-macro framework this research brings into focus not just the role of firms and context but also the role of individual within firm (a key component of small firms that has been ignored) in influencing LT innovation
  26. 26. Thank You
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