Post on 09-Feb-2016
description
PRO-POOR INNOVATION:
MARKET AND NON-MARKET DETERMINANTS. APPLICATION TO SA
INCLUSIVE INNOVATION MILTON KEYNESJULY 6-8, 2013
DAVID KAPLANUNIVERSITY OF CAPE TOWN
WIDE USE OF THE TERM
IFIs DONORS ACADEMIA RESEARCH ORGANISATIONS BUSINESS
MANY VARIETIES OF THE TERM
3 MAIN TERMS: PRO-POOR INNOVATION INCLUSIVE INNOVATION FRUGAL (JUGAAD) INNOVATION.
DIFFERENCES BUT A COMMON DENOMINATOR
“serves extreme affordability users”
WHY THIS SUDDEN CONCERN?
EARLIER PEDIGREE – SCHUMACHER. LIMITED
GLOBAL DEVELOPMENT CONCERNS – MDGs; SUSTAINABILITY
GROWTH OF EMERGING MARKETSGROWTH OF POOR CONSUMERS IN EMsGLOBAL FIRMS RESPONSE – NORTH AND SOUTH
GROWTH OF EMERGING MARKETS
GROWING SHARE OF EMs 1987 EM SHARE OF GLOBAL GDP 16% 2011 “ “ “ “ “ 31%.
SET TO CONTINUE APACE 2/3 OF GLOBAL GROWTH WILL BE IN
EMERGING MARKETS
GROWTH OF POOR CONSUMERS AND DISPOSABLE INCOME IN EMs -
CHINA 1978 2007
RURAL NET HOUSEHOLD INCOME 137 4140
URBAN DISPOSABLE HOSEHOLD INCOME 343 13785
COLOUR TVS PER 100 FAMILIES (RURAL) 0.8 94.4
COLOUR TVS PER 100 FAMILIES 17.2 137.8
INNOVATION RESPONSIVE TO DEMAND – NORTHERN FIRMS
UNILEVER (ASIA AND RECESSION HIT EUROPE) RENAULT-NISSAN (FRUGAL ENGINEERING) SIEMENS (AFFORDABLE HEART MONITOR) GE “IF GE DOES NOT MASTER REVERSE (FRUGAL)
INNOVATION, THE EMERGING GIANTS COULD DESTROY THE COMPANY”
INNOVATION RESPONSIVE TO DEMAND – SOUTHERN FIRMS
RISE OF SOUTHERN FIRMS 2006 BRIC FIRMS IN FORTUNE 500 - 15 2008 “ “ “ “ - 62.
RISE OF INNOVATIVE SOUTHERN FIRMS BUSINESS WEEK 2010 50 MOST INNOVATIVE
COMPANIES; MAJORITY OUTSIDE OF THE USA. PRINCIPALLY IN ASIA
GROWTH OF SOUTH- SOUTH TRADE
% DC IMPORTS FROM DC1995 42. 2010 56.
% DC IMPORTS OF K GOODS FROM DC1995 35. 2010 54.
% DC IMPORTS OF HIGH TECH. KGOODS FROM DC
1995 25. 2010 53.
GROWTH OF SOUTH – SOUTH INVESTMENT
% SOUTH SHARE OF GLOBAL OUTWARD FDI 1995 15. 2010 27.
INCREASINGLY CONCENTRATED IN MANUFACTURING AND SERVICES
K GOOD EXPORTERS AND HOME COUNTRY FDI CONCENTRATED IN A FEW EMERGING MARKETS.
WHY SOUTHERN FIRMS MAY HAVE THE ADVANTAGE
PATH DEPENDENCY EXPLOITING INSTITUTIONAL VOIDS
MUCH OF THE FRUGAL INNOVATION ON PART OF NORTHERN FIRMS BEING DONE IN THE SOUTH WITH SOUTHERN PARTNERS
PRODUCT AND PROCESS INNOVATIONS
PRODUCT INNOVATIONS – SUCH AS THE NANO
PROCESS INNOVATIONS – RESPONDING TO DIFFERENT RELATIVE FACTOR PRICES.
MOST CRITICAL HERE IS GREATER LABOUR INTENSITY CREATING MORE EMPLOYMENT OPPORTUNITIES FOR POOR PEOPLE
GAINS TO THE POOR
CONSUMER GAINS MORE APPRORIATE PRODUCTS BETTER FUNCTIONING PRODUCTS –
ATTUNED TO THE ENVIRONMENT
PRODUCER GAINS MORE EMPLOYMENT INTENSIVE PROCESSES NEW FIRM ENTRY MORE DYNAMIC FIRMS
WHY MARKET LED INNOVATION IS LIMITED
FIRMS RESPONDING TO DEMAND
RISING INEQUALITIES UNDERPIN DEMAND FOR NON-POOR GOODS AND PRO RICH INNOVATION:
POOR AS PASSIVE RECIPIENTS OF INNOVATION
LIMITATIONS OF MARKET LED INNOVATION
PRO-RICH INNOVATION: CHINA SOON THE WORLD’S LARGEST MARKET FOR LUXURY GOODS.
POOR HAVE NO VOICE AND NO PARTICIPATION IN INNOVATION
A MORE RADICAL VIEW OF PRO POOR INNOVATION: PARTICIPATIVE INNOVATION/GRASSROOTS INNOVATION “EMPOWERING THE POOR”
SOURCES OF MARKET FAILURE FOR POOR
TWO SOURCES: PRODUCTS WITH LONG GESTATION;
LUMPY INVESTMENTS; STRONG UNCERTAINTY. RESULTING IN POOR APPROPRIABILITY – E.G. PHARMA PRODUCTS
VERY POOR AND THE VERY MARGINALISED WITHOUT SIGNIFICANT DISPOSABLE INCOME. RESULTING IN NO EFFECTIVE DEMAND- E.G. SUBSISTENCE FARMERS; THE SAN
MARKET FAILURE FOR POOR (1)POOR APPROPRIABILITY
PUBLIC FUNDED VIA A PPP E.G. SA LOW COST HOUSING SOLUTIONS BY CSIR AND PRIVATE FIRMS
WHERE MARKET FAILURE IS PARTIC. INTENSE AND SOCIAL NEED GREAT, NEW INSTITUTIONAL FORMS.
GOV. BUSINESS. NGO. PHILANTHROPY E.G. GAVI.
MARKET FAILURE FOR POOR (2)NO EFFECTIVE DEMAND
GOVT AND DONOR FUNDING
HOW IS INNOVATION THAT MEETS THE NEEDS OF THE MARGINALISED (NO EFFECTIVE DEMAND) BEST SUPPLIED: AN EXAMPLE FROM SOUTH AFRICA
SOUTH AFRICA -
NATIONAL RESEARCH PLAN 2002 – makes explicit provision for pro-poor innovation as a key “mission”
OECD REVIEW – mission has not been implemented
SOUTH AFRICA -
POTENTIALLY NEGATIVE IMPACTS OF INNOVATIONExample: small-scale farmers in Kwa-Zulu Natal and traditional plant varieties
Threats to local varieties from innovation inappropriate to their needs (GMO and hybrid varieties)
SOUTH AFRICA
LIMITATIONS OF MARKET-LED INNOVATION
Support needed to develop climate resilient plant varieties but private sector innovation geared towards commercial varieties and lack of public research investment.
Small-scale farmers have little disposable income
APPROACHES
Identifying the needs of the poor is a vital first step
Making the case for increasing public research support to meet the needs of the poor and marginalised (in context of such support dwindling)
Ensuring coherent governance for innovation (Schizophrenic government departments that support farmers and undermine their systems simultaneously)
RESEARCHERS (per million population)– SA AND THE BRICS
2001 2007
BRAZIL 441 658
RUSSIA 3460 3274
INDIA 110 136 (2005)
CHINA 581 1077
SOUTH AFRICA 312 396
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
Brazil 1.02 1.04 0.98 0.96 0.90 0.97 1.00 1.07 1.08 -
Russia 1.05 1.18 1.25 1.29 1.15 1.07 1.07 1.12 1.04 1.25
India 0.77 0.75 0.74 0.73 0.74 0.78 0.77 0.76 - -
China 0.90 0.95 1.07 1.13 1.23 1.32 1.39 1.40 1.47 -
South Africa
- 0.73 - 0.78 0.85 0.90 0.93 0.92 0.93 -
R&D as Percentage of GDP; BRICS, 2000- 2009Source: World Development Indicators
STRUCTURAL CONSTRAINTS
HIGH AND GROWING INCOME INEQUALITY – biases market-led innovation away from poor
LOW LEVELS OF NEW FIRM ENTRY – little change in “business model” ;less attention paid to “bottom of pyramid”
LIMITED ENTRY OF FOREIGN FIRMS – from other Southern countries
MEASUREMENT OF “SOCIAL” OR PRO-POOR INNOVATION
NO CLEAR MEASURES – particularly in relation to outputs
NO CLEAR CRITERIA FOR CHOICES – what should the objective be? How to decide between competing objectives
ALLOCATION OF FUNDS – how much is justified?
STRESS ON R&D FOR COMPETITIVENESS – reinforced by absence of measurement indicators for pro-poor innovation