This impact case study looks at what has been achieved by a DEGRP project examining innovation in business and industry in low-income countries.
Led by Xiaolan Fu from the Technology and Management Centre for Development, Oxford University, the project has had far-reaching impacts, from influencing policy in Ghana, to contributing to the formulation and implementation of Goal 9 of the Sustainable Development Goals.
THE RESEARCH CHALLENGE
‘Innovation’ is considered a key driver of economic growth. According to economists, the development or use of innovations - new or improved products, production processes, or even business practices - enables firms to increase their productivity, which in turn leads to higher Gross Domestic Product (GDP).
Innovation is thought to be particularly important for low-income countries. It’s argued that without it, low-income developing countries will not be able to transition away from low-productivity activities, such as resource extraction, to more profitable, high-productivity activities such as manufacturing and services.
Yet understanding of innovation in developing countries is currently quite limited. Not enough is known about how much and what kind of innovation is occurring; whether or how these innovations are spread; or what ultimately drives firms to innovate.
Gaining a better understanding of these issues is essential if governments are to develop and implement the right strategies and policies to support growth-enhancing innovation.
THE DEGRP RESEARCH
In response to this challenge, DEGRP researchers embarked on an investigation into the determinants, sources of, and barriers to innovation in low-income countries, with a focus on Ghana. Although now categorised as a low-middle-income country or ‘LMIC’, Ghana was until recently considered a low-income country, and therefore constitutes a good case for examining the role played by innovation in boosting economic growth.
Between November 2013 and January 2014, the research team surveyed more than 500 businesses to find out more about how and why they innovate, and what constraints they face. The firms researched ranged from informal micro-businesses of fewer than nine people, to large formal businesses employing over 99 members of staff, in diverse sectors such as textile and garment production, food processing, metalwork, and construction.
The survey findings
The survey yielded a number of interesting findings on the nature, impact, and sources of innovation in Ghana. For example, it confirmed that innovation is definitely happening, and that it’s helping both formal and informal sector firms to survive and grow. It also revealed that much of this innovation, particularly in the informal sector, is happening ‘under the radar’. That is, it typically involves the adaptation of existing technologies, rather than development or adoption of brand-new or ‘new-to-firm’ technological innovations.
Gender plays a part in innovation too, with the researchers finding that firms led by women are less likely to introduce technological innovations, but are more active in adopting non-technological innovations such as new marketing techniques.
The survey results also uncovered a number of obstacles to innovation, and technological innovation in particular, including: difficulty accessing credit; under-skilled employees; perceived economic risks of innovation; inconsistent innovation policy; and low levels of collaboration with universities and research institutions, despite their important role as gatekeepers and producers of innovation knowledge and technology.
New innovation policy strategies
Armed with these insights, the team developed a range of possible policy strategies that could be used to encourage and facilitate innovation in Ghana, and in other LICs facing similar constraints.
These strategies included:
• Finance schemes enabling more firms to gain access to credit for innovation
• Offering firms compensation to offset the risks of innovating in volatile markets
• Boosting technological capacity by raising awareness of, and facilitating access to, existing government training schemes
• Fostering collaboration between firms and universities and other research institutions
THE PROJECT'S IMPACT
The research findings and proposed solutions have contributed to a number of changes, both in Ghana and further afield.
As the first comprehensive study on innovation in low-income countries, the project filled a significant gap in existing knowledge about the issue, leading to a better understanding of innovation among policymakers at both the national and international level.
This enhanced understanding in turn resulted in new action to boost innovation.
In Ghana, presentation of the research findings to the Minister of Environment, Science, Technology and Innovation (MESTI) and the Ministry of Trade and Industry, inspired the government to introduce a major new programme to strengthen university-industry collaboration for increased, and better, innovation. The project team is also now developing a project with the Ghanaian government to carry out an even larger innovation survey involving over 2,500 firms in the formal and informal sector.
In addition, the project team’s close collaboration with the Ghanaian Science and Technology Policy Research Institute (STEPRI) helped boost STEPRI’s profile among Ghanaian policymakers. As a result, STEPRI now leads the university-industry programme, and will also lead the new, larger innovation survey planned.
The project has also strengthened networks and communities of practice around innovation in low-income countries. The initial planning for the project involved think tanks and universities from Kenya, Ethiopia, and South Africa. Now that the project is complete, the research survey is being used to conduct similar innovation research in Tanzania and Uganda, with new funding support from the European Commission and World Intellectual Property Organisation.
At the global level, the research findings featured in preparatory documents for the 2030 Sustainable Development Agenda, which in turn contributed to the development of a new Sustainable Development Goal – SDG9 – which aims to promote sustainable industrialization and foster innovation.
For more on the survey findings, research methods used, and policy recommendations, read the full DILIC Survey report. Or, view our Research in Context for a shorter analysis by project lead Xiaolan Fu and DEGRP’s innovation theme lead, Dirk Willem te Velde.