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Stimulating Industrial Development in Uganda through Open Innovation Business Incubators

Joshua Mutambi

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Blekinge Insitute of Technology Licentiate Dissertation Series

No 2011:10ISSN 1650-2140

ISBN 978-91-7295-213-3

School of Planning and Media Design Department of Technology and Aestetics

Blekinge Institute of Technology Sweden

Stimulating Industrial Development in Uganda through Open Innovation Business Incubators

Joshua Mutambi

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Blekinge Institute of Technology

Blekinge Institute of Technology, situated on the southeast coast of Sweden, started in 1989 and in 1999 gained the right to run Ph.D programmes in technology.

Research programmes have been started in the following areas:

Applied Signal ProcessingComputer Science

Computer Systems TechnologyDevelopment of Digital Games

Human Work Science with a special Focus on ITInteraction Design

Mechanical EngineeringSoftware Engineering

Spatial PlanningTechnosicence Studies

Telecommunication Systems

Research studies are carried out in faculties and about a third of the annual budget is dedicated to research.

Blekinge Institue of TechnologyS-371 79 Karlskrona, Sweden

www.bth.se

© Joshua Mutambi 2011School of Planning and Media Design Department of Technology and Aestetics Graphic Design and Typesettning: Mixiprint, OlofstromPublisher: Blekinge Institute of TechnologyPrinted by Printfabriken, Karlskrona, Sweden 2011ISBN 978-91-7295-213-3 um:nbn:se:bth-00501

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Table of Contents

List of Figures

List of Tables

List of Abbrevations and Acronyms

Abstract

Acknowledgements

PART 1

Chapter 1 - INTRODUCTION

1.1Background

1.2ResearchProblem

1.3Objectives

1.4Significance

1.5ResearchQuestions

1.6ExpectedOutputs

1.7ResearchScope

Chapter 2 - CONCEPTS DISCUSSIONS AND THEORETICAL

FRAMEWORK

2.1ConceptualFramework

2.2VariousConceptsDiscussions

2.2.1Industrialization

2.2.2Entrepreneurship

2.2.3EntrepreneurshipandIndustrialization

2.2.4Science,TechnologyandInnovation

2.2.5OpenInnovation

2.2.6TripleHelixandClusters

2.2.7BusinessIncubators

2.3IndustrializationinUganda

2.3.1AnOverviewofMicro,SmallandMediumEnterprises inUganda

2.3.2BuildingEntrepreneurialCommunitiesinUganda

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Chapter 3 - METHODOLOGICAL CONSIDERATIONS

3.1Introduction

3.2ParticipatoryActionResearch

3.3DataSources

3.3.1SecondaryDataReview

3.3.2PrimaryDataCollection

3.3.3Analysis

PART II

Chapter 4 - INTRODUCTION TO THE PAPERS

4.1PaperI

4.2PaperII

4.3PaperIII

4.4PaperIV

PART III

Chaper 5 - DISCUSSIONS AND CONCLUSIONS

5.1BriefSummaryofthePapers

5.2ConcludingDiscussions

5.3ScientificContributionsandOriginality

5.4WayForward

References

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List of Figures and Tables

Figures

Figure1-1:AConceptualFrameworkfortheStudyontheRoleofOpen InnovationBusinessIncubators

Figure2-2:PillarsofGrowth

Figure3-2:SectorialContributiontoGDP

Figure4:TheEvolutionofBusinessIncubatorModel

Figure5:BusinessIncubatorModel

Figure6:GrowthofBusinessIncubatorsinBrazil

Figure7:GrowthofIncubatorsinChina

Tables

Table2-1:PrimaryandSecondaryEnrollment

Table2-2:HigherInstitutionsEnrollment2006-2007

Table2-3:DefinitionandClassficationofMSMEs

Table3-4:NumberofInnovativeFirmsbyEmployeeSize

Table3-5:PercentageShareofFirmsthatIntroducedInnovationandper formedR&DamongInnovators

Table3-6:PercentageShareofFirmsthatIntroducedTotallyNewtothe UgandanMarketandtheirTurnoverbyYear

Table3-7:GrossDomesticExpendureonR&D(GERD)asanIndicator ofR&DActivitiesinUganda

Table8:GrowthofIncubatorsinChina

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List of Abbrevations and Acronyms

AGOA AfricanGrowthandOpportunityActBDS BusinessDevelopmentServicesBTTB BackgroundtothebudgetBTVET Business,TechnicalandVocationalEducationTrainingCICS TheCompetitivenessandInvestmentClimateStrategyCOMESA CommonMarketforEasternandSouthernAfricaEAC EastAfricanCommunityEU EuropeanUnionEUG EnterpriseUgandaFDI ForeignDirectInvestmentGDP GrossDomesticProductGoU GovernmentofUgandaICT Information,CommunicationTechnologyISCP InnovationSystemsandClustersProgramLDCs LeastDevelopedCountriesMAAIF MinistryofAgriculture,AnimalIndustryandFisheriesMDG MillenniumDevelopmentGoalsMES MinistryofEducationandSportsMFI MicroFinanceInstitutionsMFPED MinistryofFinance,Planning&EconomicDevelopmentMGLSD MinistryofGender,LabourandSocialDevelopmentMSMEs Micro,Small&MediumEnterprisesMTAC ManagementTrainingandAdvisoryCentreMTCS MediumTermCompetitivenessStrategyMTTI MinistryofTourism,Trade&IndustryMUBS MakerereUniversityBusinessSchoolNAADS NationalAgriculturalAdvisoryServicesNCHE NationalCouncilforHigherEducationNDP NationalDevelopmentPlanNGOs Non-governmentalOrganizationsNPA NationalPlanningAuthorityOECD OrganizationforEconomicCo-operationandDevelopmentPAR ParticipatoryActionResearchPEAP PovertyEradicationActionPlanPFA ProsperityforAllPPP PublicPrivatePartnershipPSFU PrivateSectorFoundationofUgandaR&D ResearchandDevelopmentSBIR SmallBusinessInnovationResearchS&T ScienceandTechnology

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SME Small&MediumEnterpriseSTI Science,TechnologyandInnovationUBOS UgandaBureauofStatisticsUEPB UgandaExportPromotionBoardUGT UgandaGatsbyTrustUIA UgandaInvestmentAuthorityUIRI UgandaIndustrialResearchInstituteUMA UgandaManufacturersAssociationUN UnitedNationsUNBS UgandaNationalBureauofStandardsUNCCI UgandaNationalChamberofCommerceandIndustryUNCST UgandaNationalCouncilforScience&TechnologyUNECA UnitedNationsEconomicCommissionforAfricaUNIDO UnitedNationsIndustrialDevelopmentOrganizationUPE UniversalPrimaryEducationUPPET UniversalPostPrimaryEducationTrainingURT UnitedRepublicofTanzaniaUSA UnitedStatesofAmericaUSE UniversalSecondaryEducationUSSIA UgandaSmallScaleIndustriesAssociationWTO WorldTradeOrganization

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This work is dedicated to the memory of my late father Rev. Canon Boaz Muntu who passed away immediately after submission of the concept proposal for this research to University

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AbstractUgandaisanagro-basedlandlockedcountrywithapopulationofabout30millionpeople.Itiswellendowedwithnaturalresourcesandsalubriousclimate.Herindus-trialprofileisstilldominatedbyagro-industryandnotinnovationled,predominantlymicro,smallandmediumscaleenterprises(MSMEs).Facingthechallengesofpovertyalleviation,ahighpopulationgrowthrate(3.5%p.a),climaticchangeandenviron-mental impacts among others, Uganda identified exploitation of natural resources,valueadditionaswellasindustrializationtotransformthecountryandreducepovertyinherNationalDevelopmentPlan2010/11-2014/15(NDP).

Inthisrespect,therearemanyexistingprogramsandinitiativesinthecountrysup-portingsmallbusinesses,buttendtosufferfromanumberofweaknesses.Inparticulartypicallysmallbusinessesfinditdifficulttodoresearchanddevelopment;commer-cializetheirresultsinmarkets(innovation)asfastastheyshould.Formicro,small&mediumenterprisestobedullycompetitiveinacompetitiveeconomicenvironmentrequiresthattheydevelopinternalcapabilitiestoeffectivelyassimilate,useandadaptproductandprocesstechnologiesfortheirbusinessestosurviveonanongoingbasis.

Toovercomethisdrawback,theconceptofBusinessIncubationhasbeenproposed.Thisconcepthasgainedlargeinterestintheresearchcommunity.Thekeyideaistocreateandnurturenewbusinessesforgrowthbyprovidingservicesandinfrastructurerequiredbyutilizingtheexternalknowledgesources(openinnovation)andtriple-helixmodelwhichassistformationofbusinessandindustrialclusters.Abusinessincubatorisanorganizationthatsupportsthecreationandgrowthofnewbusinessesbyprovid-ingservicesandinfrastructurethatisrequiredbythetargetedclients.

Giventhatmostfirmsindevelopingcountriesstarttoosmalltocompeteespeciallyininternationalmarkets,apre-requisitetoindustrialdevelopment,governmentsandpolicymakersshouldgiveparticularattentiontotheconstraintsandneedsofMSMEs.Thiscanbedonebyadoptingamixofpoliciesandframeworkconditionstoreduceon the obstacles that hamper technological innovation, collaboration and businessgrowth.Inparticularisaccesstofinanceandenhancingtechnologyandbusinessca-pacitydevelopmentthroughtraining,linkagesandnetworks.

ThisLicentiatethesisdiscussesandreviewstheinitiativesandprogramsaimedatsup-portingthedevelopmentofMSMEswithaviewtostimulateindustrialdevelopmentinUganda.Themainaimofthisresearchistoexaminetheprocessofbusinessincu-bationandexplainthecontributionofopeninnovationbusinessincubatorstoentre-preneurs/start-upfirmswithinthebroadercontextofdevelopingentrepreneurship,promotingscience,technologyandinnovationandcreatingemployment.

This research focuses on the roles and relationships of government, university andresearchinstitutionsandtheprivatesectorassourcesofknowledgefortechnologicalinnovations.Literaturereview,theoryunderstanding,andparticipatorymethodsin-cludinggroupdiscussionswithquestionnaires,meetingsandinterviews,wereusedtoachievetheobjectives.

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Fromthefindings,itwasrevealedamongMSMEsthatduetotheirsizes,limitedman-agerialandtechnological skills, and inadequate functionalbusiness support serviceshavehadadverseeffectsontheirupgradingandgrowth.Therewaslittlelinkageandfollowupbetweenindustryandotherpublicresearchsectorsi.e.governmentagenciesandhigherinstitutionsalthoughtherearequiteanumberofsupportinstitutionswithpoorcoordination.TheresearchanalyzedawiderangeofissuesthatarerelatedtothedesiredstructuraltransformationoftheUgandaneconomytowardsindustrializationprocess.FinallyitwillproposestrategiesforthemostappropriatemodelforUganda.

Keywords: Business Incubation, Industrialization, Open-Innovation, Triple-Helix,Uganda

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Acknowledgements

First of all, I would like to thank the Almighty God for enabling me throughoutthis licentiatedegreeperiod since I started.A special acknowledgementgoes tomylatefather,Rev.CanonBoazMuntuwhoencouragedmetostartthisPhDprogramevenwhentherewasnosponsoryet.IfurthergivemyappreciationtoProf.BarnabasNawangweandProf.LenaTrojerfortheirsupportduringtheInnovationSystemsandClustersProgramactivitiesandtowardssecuringthissponsorshipofwhichIhavebeenabletocarryonwithmyresearch.

IwouldliketoexpressmygratitudetomytwomainsupervisorsProf.LenaTrojer,Assoc.Prof.JosephK.Byaruhangaandmyotherco-supervisorDr.B.KarikoBuhwezifortheirprofessionalguidanceandsupportthroughthisprocess.SpecialthanksgototheMinistryofTourism,TradeandIndustryfortheirsupportandallowingmetimeoffofficescheduletoattendtomyresearchwork.

IamthankfultoDr.MackayOkure,Dr.YasinNakuZiraba,Dr.PeterOkidi-Lating,Dr.J.B.Kirabira,Dr.SamuelB.KucelandmyothercolleaguesandfriendsatMaker-ereUniversityandBTHMr.JuliusEcuru,Ms.FatumaSimba,Ms.LydiaMazziKay-ondoNdandiko,GideonMbiydzenyuyandMr.GeorgeKisakyetomentionafewformanyhelpfulideasanddiscussions.IwantalsoinparticulartothankMs.ImeldaAtaiMusanaofUgandaBureauofStatisticsandMr.RichardLutaloofNationalCouncilforScienceandTechnologywhoassistedmeinconductingtheSTIIsurveys.

Iwantalsotothankmyfamily,mymother,sisters,brother,in-laws,relatives,friendsfortheirsupportandmostespeciallymywifeBarbraBabweteeraMutambiandourlovelytwochildrenSamuelandEstherfortheirlove,patienceandunderstandingdur-ingtheperiodofthisworkandwhileamawayfromhome.

Lastlybutnotleast,amverygratefultothesupportfromSida,MakerereUniversity,theCollegeofEngineering,Design,ArtandTechnology,BlekingeInstituteofTech-nologyKarlshamnandallstaffinsideandoutsideoftheseinstitutionsfortheircon-tributions.Ithankyou.

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PART I

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Chapter 1 - INTRODUCTION

1.1 Background

Uganda is an agro-based land locked country with a population of about 30 mil-lionpeople.Itiswellendowedwithnaturalresourcesandsalubriousclimate,buttheindustrialprofileisstilldominatedbyagro-industryandnotinnovationled.Facingthechallengesofpovertyalleviation,ahighpopulationgrowthrate,climaticchangeandenvironmentalimpactsamongothers,Ugandaidentifiedexploitationofnaturalresourcesandvalueadditionasoneofitsmainstrategiestotransformthecountryandreducepoverty(MTTI,2008).

Withhervisionoftransformingthesocietyfromapeasanttoamodernandprosperouscountrywithin30years,(GoU-NDP,2010),themainfocusisprivatesectordriveneconomy.ThegovernmentofUgandaalsosigneduptotheMillenniumDevelopmentGoals (MDGs)under theUNMillenniumDeclaration15.TheMDGs include: 1)eradicationofpoverty;2)achievinguniversalprimaryeducation;3)promotinggenderequalityandempoweringwomen;4)reducingchildmortality;5)improvingmaternalhealth;6)combatingmalaria,HIV/AIDSandotherdiseases;7)ensuringenvironmen-talsustainability;and8)developingaglobalpartnershipfordevelopment(MFPED,2004). The government is therefore aggressively promoting private sector develop-ment,valueaddition,employmentcreation,country’scompetitivenessimprovementandindustrializationtolevelsassociatedwithmiddleincomecountries.

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UgandaisamemberofEastAfricanCommunity(EAC)withamarketofover120millionpeoplewithaccesstothesea.EvenmoreattractiveisbeingamemberoftheCommonMarketforEasternandSouthernAfrica(COMESA)withover400millionpeople(Ngwenyaetal.,2010).Furthermore,it’swelladvancedtradingpartnersandinternationalmarketsthatincludemainlyWorldTradeOrganization(WTO)mem-ber states,EuropeanUnion (EU) countries,Asian countries andUSA/AGOA.Thecountrythereforehighlydesiresvalueaddedagriculture,valueadditionindustriesandinvestors/entrepreneurstotakeadvantageofsuchopportunities.

Industrial development is fundamental for economic growth. Both theoretical andempiricalliteratureshowsthatahighdegreeofefficiencyintheindustrialsectorcancontributetoincreasedproduction,productinnovation,highvaluemanufacturedex-portsandhigh foreignearnings. It is through industrializationand innovation thatwealth can be created and higher incomes realized from natural resources and rawmaterialstransformation.Businessincubatorscanpromoteinnovationandaccelerateindustrializationthroughencouragingbusinessstart-ups,informationandtechnologytransfer,commercializationofresearchresults,andimplementationofscience,tech-nology,innovationandindustrialdevelopmentpolicies.

Business incubationisreferredtoascomplexservicesandspecialenvironmentpro-videdtemporarilyforstart-upenterpriseswiththeaimofimprovingtheirchanceofsurvivalintheearlyphaseofthelifespanandestablishingtheirlaterintensivegrowth.Therearenumerousapproachesintheliteratureandinindustrial–economicdevelop-mentpracticetodefinebusinessincubation(Lalkaka,1997;EC-CSES,2002;Sunetal.,2007).

Uganda,duetotheunstablepoliticalsituationandeconomicmismanagementinthe1970s and1980s, experiencedvaryinggrowth rates,policies and regulatory instru-ments.Alltheseresultedintoasignificantdeclineinindustrialandcommercialsectorsandnegativelyimpactedonthegainsmadeduringthepreviousyearsfromindepend-enceto1970(UNIDO,2007).

DuringthepasttwodecadesUgandaneconomyhasestablishedastrongrecordofpru-dentmacro-economicmanagementandcontinuestoundertakeprivatesectororientedstructuralreforms.Itexperiencedsustainedeconomicgrowthaveragingsevenpercentper annum generated by different economic sectors. The government in collabora-tionwithotherdevelopmentpartnershasbeentryingtosupportsmallandmediumenterprises(SMEs)byvariousmeans,includingtechnicalassistance,capacitybuildingprograms,andincentiveschemes.However,unfortunately,industrialdevelopmentinUgandauntilnowhasnotbeensuccessfulinfollowingthepatternofindustrialdevel-opmentintheregion.

Inspiteoftheeconomicstructuraltransformationoverthepasttwodecades,theecon-omystillfaceschallenges(MFPED,2010).Thesechallengesinclude:persistentlyhighunemploymentparticularlyoftheyouth;inadequateskillsdevelopmentwhichlimitsentrepreneurshipandinnovation;inadequateinfrastructuralnetworkssuchasroads,railway,energy,waterways,andinternetusagewhichraisesthecostofdoingbusiness

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andundermineprivatesectorcompetitiveness;andalowmanufacturingbase.Theseconstraintshaveunderminedachievementoffastersocioeconomictransformationandsustainabledevelopment.

Indeedforindustrializationprocesstobesustainable,itrequiresasetofcorecompe-tencessuchasskilledhumanresource,technologicalinnovationandenhancedknowl-edgecapacity,accesstoaffordablefinanceandinfrastructure,comprehensiveandco-herentpolicyprocesses andacultureof entrepreneurshipandcompetitiveness.Thecreationandsubsequentgrowthofenterpriseswithasubstantialgrowthpotentialisvital to the economic prosperity of industrialized countries (NAEC, 2004) Similartootherdevelopingcountriesinthisrespect,Ugandarecognizestheabilityofmicro,small andmedium scale enterprises (MSMEs) to generate socio-economicbenefits,valueadditiontolocalrawmaterials,employmentcreation,incomegenerationoppor-tunitiesandwealth,promotionofentrepreneurshipandenhancingofexports.Theyconstituteanimportantdimensionintheinnovationprocess(Beal,2003;Hammeretal.,1997;Byaruhanga,2005;Tirthankar,2007).

TheInternational“DoingBusinessSurvey2010”reportranksUganda129thoutof183countriesonawiderangeofbusinessindicators.Problemsareidentifiedinpar-ticularregisteringproperty,tradingacrossborders,protectinginvestors,startingabusi-ness,enforcingcontracts,andgettingcredit.Theseimpediments,amongothers,areaffecting the competitiveness of the economy,with themain issuesbeing access tofinance,infrastructure,taxadministration,workethics,andgovernmentbureaucracy(WorldBank,2011).

InUganda,theindustrialsectorpredominantlyconsistsofMSMEswhichaccountsfor95%oftheentiresectorandemploysmorethan2.5millionpeople.TheseMSMEsconstitute90percentoftheprivatesector,contributes20%ofGDPandareverydy-namicwith80percentbeinglocatedinurbanandperi-urbanareascountrywideand,are largely involvedintrade,agro-processing,andsmallscalemanufacturing(GoU,2010).With themajority focusingon low-value services, itsunlikely therefore thatifleftalonewillbeaplatformforsignificantlytransformingtheeconomyasthecaseintherestoftheworld.Thesesmallbusinesseshaveseveraldisadvantagesthathindertheir success.Theyhavedifficulties in securing the resources theyneed for survival(FergusonandOlofsson,2004).Becauseofthis,over80-90%ofthenewbusinessesstartedeachyearfailworldwidewithinthefirstfiveyearsofoperation(Aertsetal.,2007).

Althoughtheprivatesectorhasgrownrapidlybetween2001and2007,growthinthenumberoffirmshasbeenconcentratedinsmallfirmswithlowvalueaddition.ThenumberofregisteredbusinessesinUgandain2007was25,000from800,000in2001withmajoritylocatedincentralregionofthecountry(GoU,2010;Kasekendeetal.,2003).TheservicesectoristhefastestgrowinginUgandapredominantlyintelecom-munications,hospitalityandtradesub-sectors(MFPED,2010).Duetoglobalization,internal challenges and international competition, MSMEs have faced global chal-lengesandliketherestoftheworld,lessthan30%ofthestart-upsarenotabletoseetheirfirstbirthdayinUganda(Hatega,2006).

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Yettherestoftheworldthathastriedbusinessincubationhaveclaimedsuccessrateofover85%.Incubatorshavebeenconsideredasaremedyforthedisadvantagesthatsmallandnewfirmsencounterbyprovidingnumerousbusinesssupportservices.Theyareusefulinfosteringtechnologicalinnovation,entrepreneurship,commercializationandindustrialrenewal.Forthisreasonmanycountrieshaveincreasinglybeenengagedinestablishingbusinessincubators(Akcomak,2009;Lalkaka,1997).Itisalsowidelyacknowledgedthatincubatorsareatechnologytransfermechanism,meansofpromot-ingentrepreneurshipandthecommercializationofnewknowledgeandinnovations(Phillips,2002).

UgandaGovernment’spastPovertyEradicationActionPlans(PEAPI&II)(MFPED,2004),andintherecentlylaunchedNationalDevelopmentPlan2010/11-2014/15(NDP,2010),itsstrategyforpovertyeradicationisbasedonthetransformationoftheeconomythroughprivatesectorinvestment,industrializationandexportledgrowth(i.e. emphasis focusedoneconomic transformationandwealth creation).This callsfor commitment to continue harnessing synergies and inter/intra sectoral linkages;encouragingforeigninvestmentsandexportswithhigh-valueadditionandenablingtheinnovativeentrepreneurshipbyworkingcloselywiththeprivatesector,civilsocietyandtheacademiainordertoachievetheNDPobjectives,theCountry’svisionandtheMDGs.

RecentlyEAC&COMESA launchedCustomsUnion andCommonMarketpro-tocols(Mugisha,etal.,2009;Lunegeloetal.,2009),thatabolishanykindoftradeprotectionismandstreamlinestheflowofgoodsandserviceswithintheregion.Theeconomywillhoweverbefacedwithotherkindsofnon-tariffbarrierssuchasstand-ardsandregulations,andphysicalbarriersatborders.Thereisafearthatstrongerandwellequippedregionalenterpriseswillout-competestrugglingSMEs.Whatremainstobedonethereforeistofocusonbusinessdevelopmentservices,implementpolicymeasuresandinstitutionbuildingmechanismsgearedtofacilitateandpromotedo-mesticfirmsintheirquestforcompetitiveness.Alsostrengtheningpublicinstitutionsandpolicymakers indisseminationofasetofregularlyproducedandstandardizedindicatorsincludingScience,TechnologyandInnovationindicators.

Withtheregionalintegrationandanincreasinglycompetitiveenvironment,thereisstrongneedforindustrialrestructuringandstrengtheningoftechnologicalcapabilitiesinUgandafor innovations,diversifiedproductionandvalueadditiontotakeplace.However,theUgandanexperienceintheincubationprocessisstillatanearlystageandthisresearchaimsatbetterunderstandingandinnovativewaysofbusinessincubationinrespecttotheimpact,coordination,design,developmentandmanagementproc-essesaswellastheentirescience,technologyandinnovationsystem.

TheAuthorhasbeeninvolvedinfacilitatingcluster initiativesundertheInnovativeSystemsandClustersProgramofMakerereUniversity,industrialdevelopmentpolicyformulation,andtechnologytransferprogramsinthecountry.Duringthisperiod,itwasobservedthat lackof infrastructuralfacilities,adaptationofscience,technologyand innovation; and poor business support services are the major complaints hin-

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deringindustrialtransformationandentrepreneurshipdevelopment.ThisisthemainobjectiveofthisresearchanditisinlinewiththevisionandobjectivesoftheNationalDevelopmentPlanandtheobjectivesoftheMillenniumDevelopmentGoals.

ThisresearchismotivatedbytheemergingimportanceofinnovativeclustersandtherealizationthatScience,TechnologyandInnovationarefundamentaltounderstand-ingthefieldofbusinessincubation.Oneofthestrategiesthatthisresearchproposesgovernment should adopt in enabling innovative entrepreneurship; promoting sci-ence,technologyandinnovations;value-addition,changingpeoples’mindsetandcul-ture;businessservicesandglobalindustrialnetworkfortheindustrializationprocessisthroughinnovativeinstitutionsandservicessuchasBusinessincubationsystems.

Thisthesissummarizesresearchwithinthefieldofentrepreneurshipandindustrialde-velopment.Itisorganizedinthreepartswiththefirstpartpresentingtheintroduction-backgroundinformation,problemstatement,objectives,significancefortheresearchandresearchquestions.Areviewofthekeyconceptsfromtheindustrialdevelopmentandbusinessincubationliteratureasitpertainstothisresearch;and,adescriptionofthemethodologicalconsiderations,datacollectionmethodsusedandanalysis.Thesec-ondpartpresentsthepapersonwhichtheresearchisbasedthathavebeenpublishedorpresentedinrefereedjournalandconferenceproceedingsrespectively.Finally,thethirdpartcontainsthesummarydiscussions,conclusions,thewayforwardandreferences.

1.2 Research problem

Themicro,smallandmediumsizedenterprisesandstart-upbusinessesinparticular,especiallyinthemanufacturingsectorinUgandaarefacedwithmajorchallengesforsurvivalandsuccess.Therearemanyartisanswithpotentialtostart-upenterprisesorbetter improveontheirproductsproductionprocessesandprototypesiftechnicallysupported.

Ugandahasalatentmassoftrainableworkforce,alargebaseofeducatedworkers,sci-entists,potentialinnovatorswhowouldcontributetowardsprivatesectorjobcreationthroughresearchanddevelopment;andstartingcommercialenterprises,yetitisnothappening.ManyUgandan training institutionsandagencieshaveofferedbusinessmanagementandtechnicalcourses,businessplancompetitionsforgraduatestudentsandentrepreneurs,butlittlefurthersupporttoimplementtheskillsandknowledgeacquiredduringtrainingintocommercialopportunities.

Attemptsweremadeto introducetheconceptofbusiness incubationinUgandain1960s, and from the late1990sup to to-date,other institutions andorganizationshavebeenestablishedtoimplementtheconcept.However,theworldofincubationisnot-wellknowninUganda.There is little information(noacademiccomprehen-sivestudy)ontheprocessofcreatinganeffectiveincubator,i.e.coordination,design,developmentandmanagementprocessesaswellastheentirescience,technologyandinnovationsysteminUganda.Thissituationhasnecessitatedaresearchtoinvestigatehow to overcome these mentioned gaps, re-examine the current approaches to de-

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velopingenterprises,thepotentialroleofbusinessincubationstrategyinstimulatingentrepreneurshipandfosteringindustrialdevelopmentinUganda.

1.3 Objectives

Themainobjectiveoftheresearchistocomeupwithamodelofsmallbusinessincu-bationforopeninnovationthatcanstimulateindustrializationinUganda.

Toachievethemainobjective,theresearchhasthefollowingspecificobjectives;(i)Tostudyexperiencesinothercountriesworldwideinrespecttobusinessincubation,

industrialdevelopmentandgovernmentsupport

(ii)ToidentifyfactorsthataffectperformanceofbusinessincubatorsandgrowthofincubatedbusinessesinUganda

(iii)TolinkopeninnovationapproachestoanappropriateUgandanbusinessincubatormodel

ThisLicentiateiscoveringtheworkdoneinordertoachieveobjectiveoneandpartlyobjectivetwo.TheotherspecificobjectiveswillbecoveredintheDoctoralthesis.

1.4 Significance

Start-upfirmsorsmallbusinessesthatstartinbusinessincubatorsstandahigherrateofsurvivalandsuccessbybenefitingfromthebusinesssupportservicesprovided.RisingfactorcostsandintensifyingcompetitionhaspromotedcostandrisksharingschemesamongfirmsleadingtonetworksoffirmsandR&Dalliances.Thesenetworksandalliances,inturnstimulatethegrowthofinstitutions/enterprisesdesignedtoidentifyproblemsandprovidesolutionsinvolvingspecializedknowledge.Businessincubatorsasahighvalue-addedservicesenvironmentifsuccessfullyimplemented,togetherwiththeclusteringprogram,canplayakeyroleinaddressingthementionedchallengesintheprocessofindustrialization.Theincubatorscanalsostrengthentheeffectivepart-nershipbetweenthegovernment,researchers(academia)andthebusinesscommunity(triplehelix).

TheresearchobjectivesareinlinewiththeobjectivesoftheUgandanationaldevel-opmentplanand its specificdevelopment indicators; i.e. employmentcreationandvalueaddition,increasingthelevelofindustrialsectordevelopment,promotingsci-ence,technology,innovationandICTtoenhancecompetitiveness,andimprovingthecountry’scompetitivenessposition.

Theresearchisseekingtodevelopasetofappropriatestrategiesofhowtoaddressthekeyissuesfromassessingtheinexperiencedorpotentialentrepreneurs’ideasuntiltheirvisionsarerealized.Itwillfocusmainlyonthebusinessincubationprocessandappli-cationofmethodologiesandtools.

Theresearchfindingswilltherefore;

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(a)Providecredibleinformationforentrepreneurshipdevelopment,promotionofscience,technologyandinnovationsysteminUganda

(b)AbusinessincubatormodelthatwillprovideabasisforUgandagovernmenttorealizehervisioninpromotingscience,technologyandinnovations(commercializationoftech-nologiesincludingnewproductsdevelopedfromuniversities(spin-offs));publicprivatepartnershipsinindustrializationprocess,

(c)ContributetotheliteratureandthoroughunderstandingoftheincubationconceptandprocessesespeciallybestsuitedtotheUgandansituation.Inaddition,fullyacademicre-searchedknowledgeontheentireincubationsystemwillleadtoaddressingtheimplemen-tationgapsnotonlyinUganda,butalsoregionally.

1.6 Research Questions

Duringtheresearchstudy,theresearchseekstoanswerthefollowingquestions:1)Whatfactorsaffectindustrializationprocess,theperformanceofbusinessincubatorsand

growthofsmallandmediumindustrialbusinessesinUganda?

2)Whatarethegeneralemergingtrendsinincubationindustryintermsofsupplyanddemandservicesandpractices?

3)Towhatextenthasthetriplehelix(academia,governmentandIndustry)helpedinfacilitat-ingthestart-ups,openinnovationsandgrowthofSMEs?

4)WhatlessonscanbeappliedtotheUgandansituationforthebusinessincubatorstobedevelopedfurther?

Thislicentiatethesisisofferinganswerstoquestions1,2andpartly3and4

1.7 Expected Outputs

(i.)Theresearchwillprovidesomeusefulinsights;definepolicyrecommendationsforthegovernment,Universities/ResearchInstitutesandprivatesectorfirms,businessincubatormanagers,andthesynergiesbetweenthetriplehelixactors

(ii.)Theresearchwillcontributetotheliteratureofbusinesssupportservices,innovationandentrepreneurshipdevelopmentandwillenhancetheknowledgeandskillswithintheincubationindustry

(iii.)Theresearchoutputwillbeusedtocreateawarenesstothepolicymakersandfinanciers,researchersandthebusinesscommunityinUganda.Asbusinessincubatorsforopenin-novationpickupinUgandaandbecomeeffective,themanufacturingbasewillbroadenwhichinevitablybuildsindustrialcompetenceandfirmswillbecompetitive.

(iv)TherewillbebothLicentiateandDoctoralthesis,publicationsinpeerreviewedjournalsandconferenceproceedings.

(v)AbusinessincubationmodelforindustrialdevelopmentofUganda

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1.8 Research Scope

Theresearchwill focuson theUgandan small andmedium sized industrialmanu-facturingfirms.Thesamplewill includemetalandnon-metalmanufacturers,Agro-processingandICTservices, i.e. fabricatedmetalandnon-metallicproducts,woodandwoodrelatedproducts,electricalandelectronicproducts;foodsandbeverages,textilefashionandclothing.Toenhancetheresearchresults,theresearcherwilltakeintoconsiderationofthedevelopmentoftheincubationsystemsinSweden,asanex-ampleofdevelopedcountries,TanzaniaandUganda,servingasdevelopingcountriesinEastAfricanRegion.

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Chapter 2 - CONCEPTS DISCUSSIONS AND THEORETICAL FRAMEWORK

2.1 Conceptual Framework

TheWorld inwhich research,development and innovation takeplacehas changedfundamentally.Today,openscienceandopeninnovationco-exist,creatingnewop-portunitiesandinterdependences.Newmanagementpracticesarerequiredtohandlethesituation(Verheugen,G.andPotocnik,J.(2005).Thisresearchfocusesontheroleofopeninnovationbusinessincubatorsinthecommercializationandindustrializationofscientificfindings.Figure2-1showstheinputvariablesintotheincubationprocess.Theresearchwillinvestigatehowtheincubationprocessshouldbedonetoenablethecreationofsuccessfulstart-ups.

 

Sources  of  Knowledge  &  Ideas,  and  Resources  

Business  incubation  model  for  Ugandan  industrial  development,  Educated  and  trained  professionals  in  high-­‐tech  businesses  

Open  Innovation  Business  Incubators  –Processes  and  Management  issues  

-­‐[Transferring  knowledge;  -­‐creating  synergies;  and  promoting  entrepreneurship].      

Public  and  private  partners;  Institutions  and  communities;  Books;  Authors  own  academic  and  practical  experiences  

Inputs   Process   Expected  Outputs  

professionalsinhigh-techbusiness

Figure 1-1: A Conceptual Framework for the Study on the Role of Open Innovation Business IncubatorsSource: Author (2011)

practicalexperiences

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Inthisconceptualframework,abusinessincubatorisameanstoanend,andnotanendinitself.Openinnovationbusinessincubatorisproposedasanorganizationpro-vidinginfrastructuretosupportinnovativecompaniesovercomethebarrierslinkedtothecomplexityoftheinnovationprocessandcreationofnewventures.Attentionisonthefundamentalincubationprocessandtheincubationoutcomes.

It’sassumedthatfortheincubatorstocreateanimpact,itneedsaholisticapproachofallresources,i.e.theinputs,theprocesseswithininorderfortheoutputstorealize(inotherwords,takingideasfrominceptiontoimpacts).

Thesupplyofknowledge,ideasandresources(knowledge,skills,capital)andtransferofallthesewithintheincubatorenvironmentisessentialintheprocessofsupportingentrepreneurs and new venture businesses. In this research, we are concerned withtheideasortheoriesemployedcollectivelyinordertoenableopeninnovationbusi-nessincubatorsproducethedesiredoutcomes,inparticular,therelationshipbetweenknowledge,individualsandorganizations.

2.2 Various Concepts Discussions

Whenwetalkaboutindustrialdevelopment,anumberofconceptsplayapivotalroleintheanalysis.Inthissection,somemainconceptsrelatedtoindustrialdevelopmentandusedinthisstudyareasmentionedbelow.

2.2.1 Industrialization

Industrializationhasbeendescribedascloselyassociatedwithtechnologicalprogress,aseriesofprofoundsocio-economicchangeintheorganizationofproductionandwork,andhasbeeninstrumentalingivingshapetothemodernpoliticallandscape(Bairochetal.,1996;UN/ECA,2000).Thatis,inmostadvancedcountries,industrializationhasbeenaprocessoftransformationfromatraditionaltoamodernsocietybasedonindustrialoutputsandmanufacturedexportsindicators(UNIDO,2005).Industrialdevelopmentistheprocessofbuildingtechnologicalcapabilitiesthroughlearningandtranslating them intoproduct andprocess innovations in the courseof continuoustechnologicalchange.

Technological capability refers to the ability to make effective use of technologicalknowledgeinproduction,engineering,andinnovationinordertosustaincompeti-tivenessinpriceandquality.Suchcapabilityenablesafirmtocreatenewtechnologiesand to develop new products and processes in response to the changing economicenvironment(Linsu,2000;Page,2010-Wiegratz,2009).

Truesuccess,accordinglyiscreatedthroughestablishingdynamiceconomies,thecon-cretizationofeconomiesofscale,establishingofmoreexportprocessing/specialeco-nomiczones/industrialparks,theencouragementofdiversificationandimprovementinaccesstomarkets(Page,2009).JohnPage(2009)furtheracknowledgedthatthe

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successofthemanufacturingindustryispivotintheachievementofAfrica’sdevelop-mentinitiative.

Furthermore,importantlyforindustrialdevelopmentiscapability.Theabilitytomakecapacityoperate competitively requires somethingmore: the tacit knowledge, skillsandexperiencerelatedtospecifictechnologiesthatiscollectedbyenterprisesandcan-notbeimportedorboughtin.Theprocessinvolvescreatingnewskills,partlybyfor-maleducationbut,usuallymoreimportantly,bytrainingandtheexperienceofnewtechnologies.Itrequiresobtainingtechnicalinformation,assimilatingitandimprov-inguponit.Itentailsbuildinginstitutionalratherthanindividualcapacity,withnewmanagerialandorganizationalmethods,newwaysofstoringanddisseminatinginfor-mationandofmanaginginternalhierarchies.Italsoneedsintenseinteractionbetweenenterprisesandsupportinstitutions.Finally,itrequiresthefactormarketsthatprovideskills,technology,finance,exportmarketingandinfrastructuretorespondtothenewneedsofenterprises.

2.2.2 Entrepreneurship

Theword“entrepreneur” isderived fromaFrenchword thatdescribespeoplewhoprovide a service (Todorovic, 2006). Many researchers recognize entrepreneurshipas being of fundamental importance for economic development (Wiklund, 1999).Thedefinitionofentrepreneurshiphasevolvedovertimeastheworld’seconomyhaschangedaswell.Therearemanydefinitionsofentrepreneurshipthatcanbefoundinthe literaturedescribingbusinessprocesses.Entrepreneurship is theactofbeinganentrepreneur,whichcanbedefinedasonewhoundertakesinnovations,financeandbusinessacumeninanefforttotransforminnovationsintoeconomicgoods.

Somescholarshavedefinedentrepreneurshipsas:theprocessofinitiatingabusinessventure,organizingthenecessaryresources,andassumingtherisksandrewards.Whilein1934Schumpeterwhopopularized theconceptdefined it in termsofaperson’sability tobe innovative, in termsofgoods and servicesproduced,methodsofpro-duction,markets,sourcesofsupplyandindustrialorganization.Theunderlyingen-trepreneurial attitudes andbehaviors are threekeydimensions: Innovativeness, risktakingandproactiveness(Morrisetal.,1999).Innovativenessreferstotheseekingofcreative,unusualornovelsolutionstoproblemsandneeds.Thesesolutionstaketheformsofnewtechnologiesandprocesses,aswellnewproductsandservices.Risktak-inginvolvesthewillingnesstocommitsufficientresourcestoopportunitieshavingareasonablechanceofcostlyfailure.Proactiveisconcernedwithimplementationwithdoingwhatisnecessarytobringanentrepreneurialconcepttofruition.

Entrepreneurshipisconsideredasanapproachtomanagement,definedthereforeasaprocessbywhichindividuals–eitherontheirownorinsideorganizations–pursueopportunitieswithoutregardtotheresourcestheycurrentlycontrolinaninnovative,risk-takingandproactivemanner(Todorovic,2006;Brownetal.2001;Morrisetal.,1999)

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Fromtheabovedefinitions, entrepreneurshipcoversan individual’smotivationandcapacityindependentlyorwithinanorganizationtoidentifyanopportunityandtopursueit inordertoproducenewvalueoreconomicsuccess.Entrepreneurspursueopportunitiestogrowabusinessbychanging,revolutionizing,transformingorintro-ducingnewproductsorservices.(Davidssonetal.,2009).Thethreeimportantthemesinthisdefinitionare(1)thepursuitofopportunities,(2)innovation,and(3)growthlinkentrepreneurship to industrializationprocess.Forbothstart-upcompaniesandexistingfirms,entrepreneurshipspursbusinessexpansion,technologicalprogressandwealthcreation(Lumpkin&Dress,1996).

2.2.3 Entrepreneurship and Industrialization

Industrializationisboththeprocessofbuildingupacountry’scapacitytoconvertrawmaterials intonewproducts and the system that enables production to takeplace.Theissueofentrepreneurshipanditsrelationshiptotheindustrializationprocesshaslongoccupied theattentionofdevelopmentplanners. Inparticular, thekey roleofmanufacturing industry for growth based mainly on technology driven increase ofproductivityand someessential co-factors, likehumanskills, capitalorappropriateinstitutionsisgloballyundisputed.

Internationalliteraturesuggestedthatoperatinginclustersmayhelpsmallenterprisesto overcome their growth constraints (McCormick, 1999; Andersson et al., 2004;Solvell,2009).Creatingfavorableconditionsforentrepreneurshipdoes indeedhelptheprocessofindustrialization,andbusinessincubationfocusingonnational/regionalstrengthsthroughclusteringandnetworkingisbelievedtohelpsmallenterprisesgrowandcontributetoindustrialization.Thereforesmallenterprisedevelopmenthasbeenlinkedtotheindustrializationprocess(McCormick,1999;Romijn,2001).

Whatisneededthusistocreatefavorableconditionstoachievetheaboveobjectives.Facilitatingentrepreneurswillcontributetoindustrialdevelopmentwhichisakeyroleof thedevelopmental state. Theemergenceof theclusterbaseddevelopmentstrat-egytermedas“newinnovationsystem”basedonthecooperationamonguniversities(researchinstitutions), industryandgovernmenthasbeenreportedtohavebroughtawiderangeofsupportservicesworldwidefordevelopmentofknowledgebasedbusi-nesses,with linkages touniversities, research institutes,venturecapitaland interna-tionaljointventures.Clustersaffectcompetitivenesswithincountriesaswellasacrossnationalborders(Porter,1998).

ThemajorproblemsinAfricasuchas;inadequacyofinfrastructureandskilledindus-trialhumanresource,lackoftechnologicalcapacities(industrial,technologicalinfor-mationandinnovation,lowinvestmentortheinabilitytoexploitandprocessimmensenatural resources), and technological knowledge all contributed towards the downturnofindustrialproductionthroughoutthe1980s,1990sand2000s.Theindustrial-izedcountriessuccessisexplainedfromhistorytohaveliedmainlyintheirabilitytolearnhowtoimproveperformanceinavarietyoffields,including,macro-economic

31

environment, institutional development, technological adaptation, competitive andproductive infrastructuredevelopment, use ofnatural resources, organization,mar-kets,andtheirstrongfocusonimprovingtheirskillsasawaytosolveproblemsandcompetitiveness.Figure2-2showsthepillarsofgrowthasexplainedabove.

Figure 2-2: Pillars of Growth

2.2.4 Science, Technology and Innovation

Scienceand technologyare essential tools inmeetingdevelopmentgoals, especiallythosecontainedintheUnitedNationsMillenniumDeclaration(UNSC,2009).Sci-ence,TechnologyandInnovation(STI)activitieshavebeenoneofthedrivingforcesofeconomicandsocialchangeforcenturies.Similarly,STIactivitieshaveacceleratedgrowthandbroughtaboutsocialchangethroughthemovementofpeople,goodsandservicesandanincreasedcapacitytogenerate,transmitanduseSTIknowledge(Ertletal.,2007;OECD,2006)

Science,technologyandinnovationareimportantandnecessarytoincreasecompeti-tiveness,prosperityandqualityoflife.STIisusedtomeanthegeneration,useanddiffusionofallformsofusefulknowledgeaswellastheevolutionofassociatedinsti-tutionalarrangements(UN,2003;Gault,2008;OECD,(2007)).Technologychangeisattheheartofdevelopmentworldwide.Technologyisherebydefinedasknowledgethatcontributes to thecreation,productionand improvementofeconomicallyandsociallyusefulproductsandservices.Suchknowledgethusrelatesnotonlytophysicalartifactsbutalsotoformsoforganizationfortheirproduction,distributionanduse.

 

POLICY  CO-­‐ORDINATION  Macro-­‐econom

ic  certainty  

Market  Access  

Adjustment  Support  

Infrastructure  

Adequate  finance  and  credit  

Higher Investment Improved Technology Skills Development

 Skills  development  

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Technologicalknowledgereliesheavilyonthemodeoflearning,onadaptingtonewtechnologies,oneducationalsystems,theSTIaswellastheindustrialpolicies,thena-tureandcompositionoftheprivatesectorandthecapabilitiesalreadyinherentinthepublicsphere.Science,technologyandinnovationareoftenconsideredasimportantdriversforeconomicdevelopmentandgrowth.ParticularlyindigenouscapabilitiesinSTIareessentialfortheachievementofbothshort-andlong-termdevelopmentgoals.

Innovationisseenasoneofthemostimportantingredientsinthesuccessoforganiza-tions,theproducerofsolutionstoproblemsthatarenotentirelyunderstoodorwidelyperceivedandthegeneratorofopportunitiesthatmaynothaveexistedbeforeorwerenotexploited.Inotherwords,itistheprocessofdoingorintroducingsomethingneweitheranideaoraninventiontranslatedintoagoodorserviceforeconomicgainsir-respectiveofwhethertheyarenewtotheircompetitors,countries,ortheworld.Inno-vationcouldbesubdividedintomanytypes,forexampleprocessinnovation,marketinnovation,product innovation, factor innovation,andevenorganizational innova-tion(OECD,2005;Pittawayetal.,2004;Hippel,1988;Hanel2007;MairesseandMohnen,2007).

Itofteninvolvesnewtechnologiesortechnologyapplications.Itincreasestheproduc-tivityandchoiceofgoodsandservicesavailabletotheconsumer.Itcannotdirectlybemeasuredbutinsteadbeinferredusingindicatorsforexample,numberofpatentsfilled,numberofnewproductsintroduced,orexpenditureonR&D.Thebodyofpolicies,regulations,institutionalandinfrastructuralarrangementsandactivitiescon-cernedwiththecreation,acquisition,disseminationandutilizationofscientificandtechnologicalknowledge, isgenerallyreferredtoasthenationalscience,technologyandinnovation(STI)system.

Trackingtheemergenceofnewtechnologies,productsorprocessescanprovidevalu-able feedback and informationon the rate andnatureof technological innovation.Therefore,STIindicatorsarealsokeyelementsinindustrializationprocess.Thedevel-opmentanddiffusionofnewtechnologiesplaysacentralroleinimprovedproductiv-ityandcompetitiveness.WhiletheglobaleconomyisbeingreshapedbynewICTsandbyradicaltechnologicalchangesinanumberofotherS&Tdisciplines,understandingtheprocessthatleadstoinnovationsandtotheirdissemination,theirindicatorsbothwithinandacrosssectors,isstilldeficientinUganda’ssituation.

Uganda,likemanyotherAfricancountrieshasnotbeendevelopingprimaryscience,technologyandinnovationindicatorsandtomakethemaccessibletopublicandpri-vatesectordecisionmakersforsocialeconomicaldevelopmentandinvestmentpur-poses.Ugandasuffersmanylimitationsandinadequaciesinrelationtoinstitutionalarrangements,infrastructureandpoliciesseriouslyhinderingherabilitytoinnovateinmanydirections.Therefore,nationalplansaimedatthecreationofSTIcapabilitieswillneedtoallocateagreatdealofattentiontotheevaluationofinnovationatthelevelofbusinessenterprises,thelevelofindividualsegmentsandsectors.Activitiesrelatedtoenterprisecreation,incubationandpromotionundertakeninuniversitiesandresearchcentersofacountrylikeUganda,mustreceiveadequateattentionininitiativedesign,toimprovenationalSTImonitoringcapabilitiesanddevelopinnovationculture.

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2.2.5 Open Innovation

Open innovation can be defined as ‘the use of purposive inflows and outflows ofknowledgetoaccelerateinternalinnovation,andexpandthemarketsforexternaluseofinnovation,respectively’(Chesbroughetal.,2006,2003).Dependingonitsbusi-nessmodel,afirmdecideswhetherornotexternalandinternalknowledgeisvaluabletobe furtherdevelopedandcommercialized intoanewbusiness.OpenInnovationmeansthatvaluableideascancomefrominsideoroutsidethecompanyandcangotomarketfrominsideoroutsidethecompanyaswell.Thisapproachplacesexternalideasandexternalpathstomarketonthesamelevelofimportanceasthatreservedforinternalideasandpathstomarketintheearlierera.

AccordingtoPenin(2009),openinnovationmustencompassthreeconstitutiveele-ments:(i)Voluntaryknowledgedisclosurefrom“participants”;(ii)knowledgebeingopen(whichisequivalenttosaythat“spilloversarenotcontrollable”,and(iii)con-tinuousanddynamicinteractionsamong“participants”(openinnovationmeansthatanybodycanparticipateandisthereforepotentiallyaparticipant).ThereareseveraladvantagesthatfirmscanbenefitworkinginanopeninnovationstyleandpracticesaccordingtoVanhaverbeckeetal.,(2008);KeuppandGassmann,2009;LaursenandSalter,2005);-

• Innovatingfirmsbenefitfromearlyinvolvementinnewtechnologiesorbusinessop-portunities.Openinnovationallowsinnovatingcompaniestosensedevelopmentsinawiderangeofexternallydevelopedinventionsbybuyingminoritystakesin(high-tech)start-ups,participatinginventurecapitalfunds,orbyprovidingeducationalinvestmentsinpromisingprojectsatuniversitiesorresearchlabs

• Innovatingfirmsalsobenefitfromdelayedentryordelayedfinancialcommitment.Openinnovationpracticesofferfirmsmoreflexibilityaboutwhentostarttheinternalportionoftheinnovationprocess:acompanycanstartexploringthecommercialpos-sibilitiesofatechnologyoutsideinitially,viarelationshipswithuniversities,SMEsandotherinnovationsources

• Openinnovationoffersfirmstheadvantageofanearlyexit,andtheabilitytorealizesomevaluefromprojectsthatdonotgoforwardinternally.Openinnovationischarac-terizedbythepossibilitythatinnovatingfirmscanalwayslicenseorselltechnologiesorspin-offventuresthatarenotpromisingenoughand/orthatdonotfitwiththeirbusi-nessmodelorcorecompetencies.

• Openinnovationallowsfirmstobenefitfromdelayinganexit.Ifthefirmchoosestosyndicateitsinvestmentintheventureandinviteotherinvestorsin,thefirmalsobenefitsfrom‘otherpeople’smoney’supportingthedevelopmentoftheventure.Thisiscapitalefficientforthefirm,thoughitdoesrelinquishasubstantialdegreeofstrategiccontroltotheoutsideinvestors.Inthisway,theopeninnovationparadigmallowsfirmstomaintainflexibilitywhilekeepingtheirdifferentventureoptionsopen.

Therefore,forthedevelopingcountriessuchasUgandathataredisadvantagedintermsofscience,technologyandinnovationactivities(lowlevelandlowvalue-addedindus-tryposition)adoptingopen innovationorcollaborative innovationpracticeswouldenhanceintentionsforindustrialtransformation.

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2.2.6 Triple Helix and Clusters

The‘TripleHelix’isaspiralmodelofinnovationthatcapturesmultiplereciprocalre-lationshipsatdifferentpointsbetweenindustry,academiaandthepublicsectorintheprocessofknowledgecapitalizationandsocialdevelopment(Etzkowitz,2002;Jeromeetal.,2010;Gunasekara,2006;Simba,2010).Thetriplehelixdenotestheuniversity-industry-governmentrelationshipasoneof therelativelyequal,yet interdependent,institutionalsphereswhichoverlapandtaketheroleoftheother.Emergingliteraturethat examines university-industry-government networked infrastructures supportsthesetriple-helixcollaborationsasthekeytoimprovingtheconditionsforinnovation,productivity,andwealthinaknowledge-basedsociety(Campbell,2005;Leydesdorff,2001).

Theuniversityisafirmfounderthroughincubatorfacilities;industryisaneducatorthroughcompanyuniversitiesandgovernment is aventurecapitalist throughsmallbusinessinnovationresearch(SBIR)andotherprograms.Innovationclustersarethelinkages,interactions,relationshipsanddevelopmentofdifferentbutinter-dependententities(i.e.education,research,anddevelopment, industries,financial institutions)toformavirtuouscircleofinnovationandentrepreneurship.Aclusterisageographicconcentrationofcompetingandcooperatingcompanies,suppliers,serviceproviders,andassociatedinstitutions(Porter,1998;Solvell,2009;Ketels,2009).

Clustersconstituteimportantknowledgespilloversforbusinesses.Clusteringisgener-allydefinedasaprocessoffirmsandotheractorsco-locatingwithinaconcentratedgeographical area, cooperating around a certain functional niche, and establishingcloselinkagesandworkingalliancestoimprovetheircollectivecompetitiveness.Thephysicalproximityofthefactorsoutlinedabovefurthersthecreationofformalandinformallinkagesandnetworksamongfirms,highereducationandresearchinstitu-tions,financialestablishments,publicagentsandotherlocalorganizations,wherein-formationcaneasilyflowandpropagate.Clusteringisseenasakeymeansofdrivingregionaldevelopmentbybuildingprivate andpublic sectorpartnerships tomutualbenefitthroughgovernmentandregionalinvestmentininnovationincubators,scienceparksandcities,andtechnologytransferoffices(Slovelletal.,2003).

2.2.7 Business Incubation

BusinessIncubationisauniqueandhighlyflexiblecombinationofbusinessdevelop-mentprocesses,infrastructureandpeople,designedto supportentrepreneursandnur-tureandgrownewandsmallbusinesses,productsandinnovationsthroughtheearlystagesofdevelopmentand/orchange (Rice,2002;Philips,2002).Thereare severaldefinitionsandapproachestobusinessincubatorsavailableinacademicliteratureandmanyhavebeenadoptedbyindustryassociationsandpolicymakersindifferentcoun-triesreflectinglocalculturesandnationalpolicies.However,thegeneraldefinitionofbusinessincubatorbytheNationalBusinessIncubationAssociationasmentionedontheirwebsite(www.nbia.org)is:

35

Business incubators nurture the development of entrepreneurial companies, helping them survive and grow during the start-up period, when they are most vulnerable. A business incubator’s main goal is to produce successful firms that will leave the program financially viable and freestanding. The most common goals of incubation programs are creating jobs in a community, enhancing a community’s entrepreneurial climate, retaining businesses in a community, building or accelerating growth in a local industry, and diversifying local economies.

Despitetheeffortstodevelopageneraldefinitionforbusinessincubation,therearestillavarietyofmodelsofbusinessincubators.Inbusinessincubation,thereissomedegree ofGovernment,Academia and industry involvement (Chandra, 2007).Themost common classification of business incubators is based on funding. There arethosethatare:(i)publicfundedsuchasthosesetupbygovernmentagenciesinsci-ence/technology/business parks, research institutions and universities (ii) privatelyfunded such as those inprivately runorganizations and enterprises.Recent studiesintroducedthemixed-modelsofbusiness incubators suchaspublic-privatepartner-shipsincubators(Lalkaka,2000).

The term ‘incubator’wasderived from the fundamentalmeaningof the term:Theartificialnurturingofthechickenegginordertohatchthemfasterinasheltereden-vironment.Thesamehatchingconceptisappliedtotheincubatingofcompanies;itspeedsupnewventures’establishmentsandincreasestheirchancesofsuccess.Anin-cubatorthushatchesnewideasbyprovidingnewventureswithphysicalandintangibleresources(BeckerandGassmann,2006).

Business incubationconceptrestsontheargumentthat ifweakbutpromisingnewbusinesseswithapotentialofgrowingintosuccessfulventurescanbeidentifiedatanearlystageandhelped,failures,lossofresourcescanbereducedandmoreideascanbedeveloped(Hamdani,2006).BusinessincubationoriginatedintheU.Sinthelate1950sinanefforttore-useabandonedorunderutilizedbuildings,createwealthandemploymentandcontributetolocalandregionaleconomicdevelopment(WigginsandGibson,2003;HackettandDilts,2004).However,theconcepthasevolvedovertimecontrarytowhatwasoriginallyclaimed.

Incubatorsareofbasicimportanceintheprocessofestablishinglinksbetweenresearchandbusiness.Theyprovidesupportservicestostart-upfirms,“temporarily’;enablingyoungentrepreneurswithascientificbackgroundtobuilduptheirbusinessmanage-mentknow-howanddeveloptheirinnovativebusinesses.Incubationtakesplaceinbothphysical and virtual incubators.The later use the internet toprovide supportservicestotheenterprises,whichcouldnotbelocatedinthelimitedphysicalspaceavailableforstart-ups.Acrosstheincubatormovement,themanagementproblemsofincubatorclientsaremetwiththedeliveryofavarietyofvalue-addedmanagementservices.Thedrivingforce(inincubatorprograms)isthesupplyofexpertise,capitalandsupportthatcomesfromassistanceactivitiesdirectedtowardsfillingthevoidsinentrepreneurs’abilities(Duff,1994).

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2.3 Industrialization in Uganda

Thecountryiswellendowedwithnaturalresourcesandahealthyclimate.Although,there is abundanceof rawmaterials, they arenot exploited andeffectivelyutilized.TheindustrialsectoroccupiesacentralpositionintheGovernment’svisionandthepolicyactionsaregearedtowardseconomicandsocialtransformation.Theindustrialsectoriscontributing24%ofthecountry’sGDP,whileagriculture,servicesandotherscontribute22%,48%,and6%respectively(UBOS,2010).Therelativesmallshareofindustry’scontributionandthelargershareofservicesareuncharacteristicofalow-incomecountryintermsofvalueaddedandemployment.

Industrial Development in Uganda is an integral part of the Government’s overallNationalDevelopmentPlan,2010/11-2014/15thatistobeachievedbytransformingUgandaintoamodernandprosperous/industrialcountry.Theeconomyispredomi-nantlyagriculturalandheavilyreliantontheexportofprimaryrawcommoditieswitharelativelysmallindustrialsectorwhoseshareofGDPhasincreasedsteadilyoverthepastdecadethroughexpansion,diversificationandestablishmentofnewindustries.

Apparently,themanufacturingsectorinUgandahasdifficultiesrealizingthepotentialfor innovation,productivity improvement and sectoral growth (productdiversifica-tion,andmarketpenetration).Theseinadequaciesunderminethecountry’sambitiontoindustrializeandthecompetitivenessofindustrialandrelatedsectorsinUganda.ThebasisforUganda’sfutureprosperityanditsabilitytoinvestintheimprovementsdesired will depend on the competitiveness of its existing and future industries aswellas strongpolicy implementationcapacity.Thiscanonlybedonebyadvancingknowledge,valueaddition,promotehighperformanceandgoverningpractices,sci-ence,technologyandinnovation,aswellasbuildingtheskillsofthemanufacturingworkforce.

Figure 3-2: Sectoral Contribution to GDPSource: Uganda Bureau of Statistics Database, 2010

 

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InUganda,theindustrialsectorisdominatedbyMSMEswhichaccountsfor95%oftheentiresectorandemploysmorethan2.5millionpeople.TheMSMEsconstitute90percentoftheprivatesector,andareverydynamicwith80percentbeinglocatedinurbanandperi-urbanareascountrywide.Theyarelargelyinvolvedintrade,agro-processing,andsmallscalemanufacturing.MSMEsrepresentoneofthemostviablevehiclesforsustainablegrass-rootseconomicgrowthinthecountry(GoU,2010).

TheNewPolicyFrameworkandinvestmentprioritiesoutlinedintherecentlypub-lishedNationalDevelopmentPlan(NDP)areexpectedtoincreasethepaceofstruc-turaltransformationoftheeconomy.Thecurrentnationalindustrialpolicyalsospellsout aspects of national development and proposes several interventions targeted atimprovingtheperformanceandcontributionoftheindustrialsector.Thepolicyfocusincludes:

1. Extractinganddevelopingnaturaldomesticresource–basedindustriessuchaspetro-leum,cement,andfertilizerindustries;andpromotingcompetitiveindustriesthatuselocalrawmaterials

2. Agro-processing;focusingonfoodprocessing,leatherandleatherproducts,textilesandgarments,sugar,dairyproducts,andvalueadditioninnicheexports

3. Knowledge–basedindustriessuchasICT,callcenters,andpharmaceuticalsthatexploitknowledgeinscience,technologyandinnovation

4. Engineeringforcapitalgoods,agriculturalimplements,constructionmaterials,andfabrication/JuaKalioperations(MSMEs)

UndertheeconomicprioritiesintherecentlylaunchedNDPwasenhancingeconomicdevelopmentopportunitiesandnotonlyinmajorurbancentersbutthroughoutthecountry.Towardsthisgoal,thegovernmentisdevelopinganindustrialparkineveryregionalcentertosupportinvestorswithworkspaces,servicedwiththenecessaryfa-cilitiessuchaselectricity,roadnetworksandwater.Sofar,developmentof25parksisinprogress,withthethreeKampalaindustrialandbusinessparkslocatedinNamanve,LuziraandBweyogerere.

Generallycountrywide,thegovernmentisworkingtoimprovetheroadnetwork,en-ergy supply, ICTandmuch improvement inwater supply.Ugandahas inadditionshown a comparative advantage in providing education services in the region. Forinstance, Uganda has one of the top ranked universities in Sub-Saharan Africa ex-cludingSouthAfrica,MakerereUniversity.Thereisanadvantageofhighlyeducatedandtrainedlaborforce,withavailabilityoflandforbothindustrialandagriculturaldevelopment.

However, with the comparative advantages mentioned above, Uganda is still con-strained from manufacturing of capital goods and services due to weaker businessenvironment,highcostsofinfrastructureandhightradecosts.Tothiseffect,attentionshouldbegiventohumanresourcedevelopment;skillsandtechnologydevelopmentforcomponentsofvaluechains;innovativeinstitutionsandservices;provisionofef-ficient infrastructure services, fostering regional integration and coordination, rein-forcedfinancingandriskmitigationmechanisms;andenablingpolicies.

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ItisworthnotingthatUgandanpopulationgrowthrateisrapidlyexpandingandac-cessibilitytoeducationcontinuestoimprove,employablecitizensbeingchurnedoutoftheeducationinstitutionsoverflowingthejobmarket,hencetheriseinunemploy-ment.UniversalPrimaryEducation(UPE)wasformallylaunchedinUgandain1997andhastodateresultedintheenrollmentofover8millionpupilsfromPrimaryOnetoPrimarySeven(UBOS,2010).Inaddition,thegovernmentalsocommencedtheUniversalSecondaryEducation/UniversalPostPrimaryEducationTraining[USE/UP-PET]Programmein2006andtherateoftransitionfromprimarytopostprimaryhasincreasedby30%.ThesecondaryschoolenrollmentisoverOnemillionfromSeniorOnetoSeniorSix.

Thegovernmentpolicytoliberalizetheeducationsystemhasledtoanincreaseinthenumberofprivatehigherlearninginstitutions.Ugandahasatotalof27universities,outwhich5arepublicallyownedand22areprivatelyownedwhilethetotalnumberofinstitutionsis139includinguniversities,collegesandothertertiary(Non-University)institutions.

Table 2- 1: Primary and Secondary Enrollment

Category of School Enroll-

ment

2005 2006 2007 2008 2009

Primary1-7:Grandtotals 7,223,879 7,362,938 7,537,971 7,963,979 8,297,780

SecondaryS1-S6 728,393 814,087 954,328 1,088,744 1,194,454

Source: UBOS Abstract 2010

Table 2-2: Higher Institutions Enrollment 2006-2007

2006 2007

Institutions No. Male Female Total Male Female Total

Universities 26 46,475 34,712 81,187 55,169 41,880 97,049

Universitycolleges 12 46,475 34,749 81,224 11,094 8,939 20,033

TechnicalColleges 6 1,848 132 1,980 1,844 116 1,960

CommercialColleges 48 9,786 9,053 18,839 8,512 8,671 17,183

Management 8 2,000 2,156 4,156 1,789 2,046 3,835

Health/Medical 15 2,108 1,024 3,132 2,167 1,116 3,283

Agricultural&Forestry 6 1,370 281 1,651 1,305 407 1,712

TheologicalColleges 2 850 248 1,098 1,024 64 1,088

LawDevtCentre 1 500 300 800 500 300 800

GrandTotal 124 111,412 82,655 194,067 83,404 63,539 146,943

Source: Uganda Bureau of Statistics Abstract 2010

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Duetotheincreaseinthenumberofhighereducationandtertiaryinstitutions,moregraduates aregettingoutof these institutions.With thegovernment’spolicyof fo-cusing on disciplines key to national development, the enrollments in science andtechnologyhascontinuedtorise,forinstancetherewasa5percentincreaseratefrom2005to2006(NCHE,2007).Thereisneedforaseriousefforttohaveinternshipswith the labourmarket andpractical training in theworldofwork. It is thereforeimperativeforhighereducationinstitutionsandtheeconomytodevelopmechanismsforcontinuousandsustainableinterfacebetweeninstitutions,R&D,andthemarket.

Inspiteof thecommendableeconomicperformance, thecountrycontinuestofacesomechallengeswhichhaveunderminedachievingmuchfastereconomicgrowthandsocio-economictransformation.Inparticular,althoughtheindustrysectornowac-countsfor24percentofGDP,industrialdevelopmentinUgandaisstill facedwithinteralia,thefollowingconstraints

• Inadequatetechnologiesfortheprocessingofagriculturalandmineralproducts

• Inadequateindustrialinstitutionalsupportservicesforthedevelopmentofacompetitiveindustrialsector

• LackofentrepreneurshipdevelopmentandMSMEssupportinstitutions

• Limitedscopeandlinkagesforforwardandbackwardintegrationofindustries

• Lackofengineeringindustries,especiallyindustriesproducingcapitalgoods,interme-diategoods,sparepartsandcomponents,allofwhichhaverestrictedUganda’schoiceoftechnologiesforindustrialization,inparticularforproductdesign,productionandmaintenanceknowhow

• Inadequateskilledindustrialhumanresourcesincludingmanagerialandcriticalskillssuchasentrepreneurialcapabilities,engineers,technologists,andtechnicians

• Inadequateinfrastructureconduciveforindustrialdevelopmentandutilityservices,especiallyinsufficientenergysupply,poorroadnetworks,lackofrailwaynetworks,littlepipedwaterforproduction,etc.

• Highcostofaccessingcapitalandlowtechnologydevelopment;allofwhichcontributetothehighcostofproductionfordomesticindustriesandarebarrierstoindustrializa-tion

The industrial sector is for instance contributing24%of the country’sGDP,whileAgriculture,servicesandotherscontribute22%,48%,and6%respectively(UBOS,2010)comparedtoTanzaniawith24.2%industrysectorcontributiontoGDP,(URT,2010).ThelowcontributionoftheindustrialsectortotheannualGDPisattributedtoslowgrowthinthemanufacturingsector.

With theneed tochange themindsetofAfricansandUgandans inparticularwithrespecttodoingbusinessandworkattitudes,businessandtechnologyincubatorswillcontributetoaddressingtheaboveconstraints.

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2.3.1 An Overview of Micro, Small and Medium Enterprises in Uganda

There is greatdiversity in thedefinition and classificationofmicro, small andme-diumsizedenterprises(MSMEs)amongcountries.Severalcriteriaareusedtodefinesmallbusinesses.Themostwidelyusedkeycriteriaincategorizingenterprisesincludenumber of employees, annual sales turnover, and capital/total assets. The MinistryofFinance,PlanningandEconomicDevelopment(GoU,2007)gavethe followingdefinitions:

Table 2-3: Definition and Classification of MSMEs

CRITERIAMICRO

ENTERPRISESMALL

ENTERPRISEMEDIUM

ENTERPRISE

Numberofemployees <=4employees <=50employees >=50employees

SalesTurnover <=12millionUGX <=360millionUGX >=360millionUGX

TotalAssets/Capital <=12millionUGX <=360millionUGX >=360millionUGX

Bythesedefinitions,MSMEscontributeapproximately75percentofUganda’sgrossdomesticproduct (GDP) and employ approximately2.5millionpeople, signifyingtheir importance in the economicdevelopmentofUganda.But, at the same time,MSMEshaveoperationalandstructuralchallenges.Studieshaveshownthat70%ofthenewfirmsinUgandadon’tsurvivefirstyear(Hatega,2006),whileinEuropetheydon’tsurvivethethirdyearandthatthenumberconsiderablyfallsto15-20%amongthosethatareincubated(Akcomak,2009).

TheobstaclesthataffectMSMEs’abilitytocompetefavorablyinclude:limitedinfor-mationonfinancingproducts;poormanagerialpractices; lackof technical trainingandadviceinsmallbusinesses;problemsinaccessingresourcesandinputs,technol-ogy,skills;inabilitytoaccessproduct/processstandardandcertificationservices;con-straints of packaging, labeling, branding and marketing; and other infrastructuralsupport(lackofworkplaceandstoragefacilities,etc.)requiredforeffectiveoperationsasbusinessenterprises.Manyofwhichoperateintheinformalsectorwithlittlecol-laborativerelationships(MFPED,2007;MTTI,2008).

Micro,smallandmediumenterprisedevelopmentistheresponsibilityofawiderangeofgovernmentministriesandinstitutions,privatesectorassociationsandagencies.Alargenumberofnon-governmentalorganizationsarealsoincludedinMSMEdevelop-ment.AwellcoordinatedpolicyframeworkandinstitutionalmechanismtosupportMSME development is still lacking. However, the promotion and development ofmicro,smallandmediumenterprisesistheresponsibilityoftheMinistryofTourism,TradeandIndustrywiththesupportoftheMinistryofFinance,PlanningandEco-nomicDevelopment,buttheroleclarityissomewhatlacking.

ThereforetheultimateresponsibilityforthedevelopmentandpromotionofMSMEssectorinUgandacannotbepointedoutinperhapsaclearmanner.Despitetheex-istenceofbusiness,vocational,managementskills institutions,memberbusinessas-sociations,chambersofcommerceuptothegrass-rootlevelsandotherdonorsupport

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programmesforMSMEdevelopmentinthecountry,thereissometimesduplicationofwork/programs across agencies, governmentdepartments andministries -whichcertainlyderailseffortstodeveloptheMSMEsector.

Itisstressedthattechnologicalinnovationandtheassociatedinstitutionaladjustmentsunderpinlong-termgrowthandmustbeatthecenterofanystrategytostrengthentheprivatesector(UN,2005).Theemergenceoftheclusterbaseddevelopmentstrat-egytermedas“newinnovationsystem”basedonthecooperationamonguniversities(research institutions), industry and government has been reported greatly to havebroughtawiderangeof support servicesworldwide fordevelopmentofknowledgebasedbusinesses,withlinkagestouniversities,researchinstitutes,venturecapitalandinternationaljointventures.Clustersaffectcompetitivenesswithincountriesaswellasacrossnationalborders(McCormick,1999;Porter,1998)

Additionally, business incubation focusing on national/regional strengths throughclusteringandnetworkingisbelievedtohelpsmallenterprisesgrowandcontributeto industrialization (McCormick, 1999). Business Incubators often provide youngfirmswithasharedspacebusinessandprofessionalservices,andaccesstosourcesoffundingthataredifficultforyoungfirmstoacquireontheirown.Agreatmajorityofincubators are connected to institutions suchasuniversities, communities, researchinstitutes, consortiums, government administration councils, and Non-governmentorganizations.

2.3.2 Building Entrepreneurial Communities in Uganda

EnterpriseDevelopmentisgrowinginpopularityasanapproachtocommunityeco-nomicdevelopment.Itsgoalsaretocreatewealthforownersandemployeesbyhelpingentrepreneursstartandgrowtheirbusinesses.Conceptually,entrepreneurialfunctionsandactivitiesmaybeperformedbyindividualsorbycorporations.Theymayinvolverelativelysmallamountofresourcesasinthecaseoffamilysmallscaleenterprisesortheymaybelargescaleventurecapitaloperations.Theymaybeconductedbyanewbusinessenterpriseestablishedfortheentrepreneurialtasksorcarriedoutwithinanestablishedfirmasanewlineofactivity,henceintra-preneurship.

Entrepreneurshipandentrepreneursareusuallyassociatedwiththeinitiationofbusi-nessventuresthatpromisetobeprofitable,theresponsibilityofmakingbasicbusinesspolicydecisionsthatdeterminethecourseoftheenterprisesandtheinnovationscon-cerningnewproductsornewproductionmethodsorformsofbusinessoperations.Anentrepreneurisinvariablytheonewhocommitsthecapitalandbearstherisk(Sieh,1989;LichtensteinetAl.,2004)

Thisdefinitionhighlightstwoimportantattributesoftheentrepreneurialprocess:op-portunityandinnovation.Micro,smallandmediumenterpriseshavebeenrecognizedinthenationaleconomiesfortheircontributions,employmentcreation,skillsdevel-opment, regional economicgrowth.Uganda’s entrepreneurship sector is among themostvibrantintheworldaccordingtotherecentglobalentrepreneurshipsurveys,butfacesachallengeofkeepingbusinessesafloat.

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Ugandahasalsotakenstrongconsiderableeffortsinrestructuringtheexistinghigherinstitutionsoflearningandsupportedestablishmentofnewoneswithparticularem-phasisonbuildingentrepreneurialskills,startedpromotingstudentscapacitytotrans-form ideas intobusinessproposals, applicationof informationandcommunicationtechnologies,aswellasactualproductsandservicesforlocalandregionalmarkets.

However,withthestudents/graduatesdevelopingpracticalskillsinenterprisecreationandtestedinnovativeideas,theywillneedsupportinstitutionsandinfrastructuralfa-cilities,suchasfinancialinstitutions,venturecapitalists,businessandtechnologyincu-batorstonurturenewenterprisesthroughprovidingcriticalservicesintheearlystagesofenterprisedevelopment. Importantly,entrepreneurswouldbebetterequippedtosucceedintheirinvestmentplansiftheyhaveavailabletherequiredskillsandcapa-bilitiesattheleveloffirmsandsupportinstitutions.Withthisapproach,thebenefitsofBIscanbeattainedinadistributedmannerandcanefficientlystimulateindustrialdevelopment.

UgandahasgotanumberofbusinesssupportorganizationsofferingservicesintendedtohelpSMEs/firmsgrowandbreakeven.Theseorganizationsincludethosesetupbyprivatesectoroperatorsandthosethatareaffiliatedtothegovernment.Thekeyamonggovernmentministriesandagenciesinclude:MinistryofTourism,TradeandIndustry,MinistryofAgriculture,AnimalHusbandryandFisheries,MinistryofFinance,Plan-ningandEconomicDevelopment,UgandaInvestmentAuthority,UgandaRevenueAuthority,UgandaNationalBureauofStandards,UgandaExportPromotionBoard,UgandaIndustrialResearchInstitute,ManagementTrainingandAdvisoryCenter,etc.while the private organizations include: Private Sector Foundation of Uganda, En-terpriseUganda,UgandaManufacturersAssociation,UgandaNationalChamberofCommerceandIndustries,Microfinanceinstitutions,UgandaSmallScaleIndustriesAssociation,andNon-GovernmentOrganizations.

Theservicesthattheyoffervaryandtheyinclude:• Entrepreneurshiptrainingprogramsthatrangefrommarketingandsellingstrategiesto

financialandbusinessmanagement;

• Theyalsofacilitateandstructurebusinesslinkagesespeciallylinkingsmallandmediumenterprisestolargerandolderorganizations;

• Theyalsohelpfirmsinstallandimplementqualitycontrolsystemstoimprovetheprod-uctsandservices.

• TheyalsoofferbusinessstartuptrainingtoyouthplanningtosetupbusinessesandhelpSMEstoparticipateininternationaltradefairswheretheymarketandcreateawarenessfortheirproducts.

• Thegovernmenthasalsopromotedthepolicyofmicrofinanceasatoolforpoweringmicro,smallandmediumenterprisesinofferingcreditfacilities.

• Someoffergrantsasseedmoneyforacquiringmachinery,rentoffices,training,etc.

Therehavebeen somegood results from theseprograms,but there are also a largenumberofproblems.Thus,withalltheaboveinterventions,thestatisticsonSMEs

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failingareappalling.Inordertopropelbusinessesforwardandsupporttheiropera-tionstohigherandacceptablestandardswhichwillleadtoproductivity,sustainablegrowthandindustrialization,investingininfrastructureespeciallyintheinstitutionalandsupportinfrastructure/facilitiesismoreappropriateandonlythenwilltheabovemeasuresattainthesustainableimpact.Oneoftheproposedinstitutionalsupportin-frastructuresisthroughbusinessincubationcenters.

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Chapter 3 - METHODOLOGICAL CONSIDERATIONS

3.1 Introduction

Thischapterintroducestheresearchstrategyandthemethodologicaltechniquesap-plied.Thelimitationshavebeenalsodefined.Theresearchstrategyadoptedwasin-spiredbyParticipatoryActionresearch.ItalsoinvolvesinterviewsandsurveysfromdifferentstakeholderswithinUganda,TanzaniaandSweden.TheworkpresentedsofariswhathasbeendonewithintheUgandansituationandinliteraturereview.Suchafocusledtoinvolvemanystakeholdersincludingrepresentativesofseveralgovernmentministriesandagencies,communitybasedandbusinessdevelopmentorganizationsorassociations,environmentalorganizations,academia,privatebusinessesandcoopera-tivesocieties.Itisbothpractice-andtheory-drivenresearchforpotentialbenefits.Anactionresearchapproachwasseentobeappropriate.

3.2 Participatory Action Research

Action research is known by many other names, including participatory research,collaborative inquiry, emancipatory research, action learning, andcontextual actionresearch/ action learning, but all are variations on a theme. “Action research...aimstocontributebothtothepracticalconcernsofpeopleinanimmediateproblematicsituationand to further thegoalsof social science simultaneously. Thus, there isadualcommitmentinactionresearchtostudyasystemandconcurrentlytocollaborate

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withmembersofthesysteminchangingitinwhatistogetherregardedasadesirabledirection(Dick,2000)Accomplishingthistwingoalrequirestheactivecollaborationofresearcherandclient,andthusitstressestheimportanceofco-learningasaprimaryaspectoftheresearchprocess”(O’Brien,2001;DanMacIsaac,1996).

ParticipatoryActionResearchprovidesmeanstomeasureresultsagainstinitialgoalsandidentifycriticalelementswithinaprojecttoadvancethedesiredoutcome(Ryd-hagen,2002;Simba,2010;Otine,2011;Lating2009).ThemethodologicalapproachwasinspiredbytheParticipatoryActionResearch(PAR),asacollaborativeapproachwhich involvesallpartners intheprocessandrecognizes their strengths. It ismoti-vatedbythetriplehelixconceptandtrans-disciplinaryknowledgeproduction(Mode2)(Gibbonsetal.,1994).Theresearchhasadoptedbothquantitativeandqualitativemethods(Yin,R.K.,2009;Creswell,J.W.2008;Driscolletal.,2007).

Toaddressandachieveobjectiveone,andpartlytwooftheresearch,inadditiontoupdatingtheearlierinformationgatheredduringthepreviousstudies,thefollowingstudiesandsurveysweredone;

(i)FormulationoftheNationalIndustrialPolicy

(ii)NeedsAssessmentsurveyfortheartisans,handicraftandsmallagro-processorsundertheinnovationsystemsandclustersprogram

(iii)TheScience,TechnologyandInnovationIndicatorsstatusinUganda

(iv)IntroductionoftheValueadditionandutilizationoflocallyavailableresourcesprogramnamed‘OneVillageOneProductProgram’inUganda

3.3 Data Sources

Multipledatacollectionmethodswereemployedfordatacollectionfromtheprimarydataandsecondarydatasources.Weadministeredquestionnairesandconductedin-terviewswithstakeholders,heldgroupdiscussionsandanalysis.Thepurposeandfocusofthedataandinformationcollectionwastoidentifytherelevantliteratureandback-groundinformationconcerningthesubject;theapprovedpolicies,proposedinitiativesandtheimplementingagencies/serviceprovidersandhowtheycandelivereffectivelytomeettheneedsoftheirclients.

ThemainobjectivesweretoaddtotheexistingknowledgeoftheneedsoftheMSMEsandstart-ups,identifyawareness,requirementsandbarriersparticularlywhenstartingorgrowingabusinessinordertofindmostappropriatewaystoenhanceservicede-livery,promotescience,technologyandinnovationandhowbesttoengagethetriple-helixforeffectivebusinesssupportservices.

Ultimately,theresearchisinvestigatingtheelements,strengths,andweaknessesoftheexistingBIslocally,regionallyandinternationally.Itisalsofocusingontheactors,thelinkagesandthefactorsthataffectthesuccessesorfailures.Theresearchhaslimita-tionsparticularlyinobtainingdataduringtheinterviewsandsurveys.Accesstosomeprivatecompaniesandsomesensitiveinstitutionslikebanks,securityorganizations,

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andhealthcentersfortheirorganizationalandinternalissueswasnotpossible.Wheretheydidagree,itwassurethatdatawasnotgenuineandthiscouldunderminetheaccuracyoftheinformation.

3.3.1 Secondary Data Review

An extensive literature review from a wide range of selected articles from journals,governmentpolicies andpublications, technicaldocuments, reports andbookswascarriedouttoinformboththeapproachused,thefocusoftheworkandanalysisofthecontent.Thisinvolvedconceptualandliteraturereviewonindustrialization,en-trepreneurshipandbusinessincubationandtriple-helix;andtheirimpactonbusinessdevelopmentandindustrializationprocess.Thisledtoanin-depthunderstandingoftheincubationprocess,theactorsandtheenvironment.IthelpedinidentificationoftheproblemandthemitigatingfactorstoimprovethesituationinUganda.Theanaly-sisalsoinformedthedesignandconductofinterviewsandsurveys.

3.3.2 Primary Data Collection

Primarydatacollectioncoveredinformalgroupdiscussionsindifferentworkshopsandmeetingsattendedtointroducetheresearchtopicandthescopeinordertobuytheirsupportwhenitcomestodatacollection.

Semi-structuredQuestionnairesfortheinterviewsandSurveysweredeveloped,pre-testedandusedtocollectdataface–to–facefromthestakeholdersinUgandatoen-ablethecollectionofin-depthqualitativeinformationi.e.viewsandexperiencesfrombusiness owners and stakeholder organizations/ support service providers. Informalsessions with stakeholders were organized whereby stakeholders were randomly se-lectedbasedonthesub-sectorsselectedandinterviewedaccordingtothesetquestion-naires.Thesemi-structured interview formatwas selectedandused since itallowedthoseinterviewedtoaddcommentsandissuestothosealreadyidentifiedinpreparedsub-sectionsandquestions.

ThisresearchcoincidedwiththeearlierplanforconductingtheResearchandDevel-opment, and innovation survey,whichwerevery relevant to this research.So thesesurveyswereconductedtogivebackgroundinformation.Theinnovationsurveyas-sembleddataon innovatorsandnon-innovators,dependingonthestructureof thequestionnaireandthenatureofthedata.“Innovators”weredefinedasenterprisesorinstitutionsororganizationsthathaveoverthelastthreeyearsintroducedanewprod-uctoranewprocess,havetried,orarestillintheprocessofdoingso,where“new”wasdefinedassignificantlyimprovedandcompletelynew,andwhereadistinctionismadebetweenproductsnewtothefirm(butnotnecessarilynewtothemarket)andproductsnewtothefirmandtothemarket.AsampleofstakeholdersinthiscaseforR&DandInnovationsurveys,included;government,businesses,educationinstitu-tions,businesssupportserviceprovidersandassociations.

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3.3.3 Analysis

Although,datacollectedwasmixed,somewithincompletequantitativedata,informa-tionaboutfundsandexpenditureandthusimportantdatatoassessgenuinesituationwasjealouslyguarded.Theanalysisofdatawasdonebasedonthedatacollected,thequalitative and quantitative and conclusions were drawn. Analysis of the data col-lectedhelpedtheauthorstodevelopstrongevidencefromtheinvestigationsandingenerationof thepapers thatwerepublishedandpresented in the conferences andworkshops.Thiscontributedinthedisseminationoftheresultsandobtainingfurthercommentsforfutureimprovements.

Alltheethicalrulesandregulationshavebeenfollowedbearinginmindtheconfiden-tialityissues.TheAnalysismethodologymentionedabovewasinspiredbydistributedknowledgeprocesses(Nowotnyetal.,2011).Itisfocusingprimarilyontheissuesoflongtermstrategies,innovationindicatorsaswellascollaborationandpartnerships.

ThereferencesforthisPartIarefoundattheendofPartIII(page87)

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PART II

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Chapter 4 - INTRODUCTION TO THE PAPERS

Thislicentiatethesisisacompilationoffourpapersasoutlinedbelow.

Paper I:Mutambi, J. (2008).Advancing Value Addition and Competitiveness through Standardization to Promote Manufacturing.

Proceedings of the 2008 Annual International Standards Conference (AISC) June09th–12th,2008,KampalaUganda

Given today’s increasingly competitivebusiness environment, this paper introducestheimportanceofmanufacturingsectorasthemainengineofstructuraltransforma-tionandcriticaltochangingandmodernizingAfrica’seconomicstructure.Manufac-turingandprocessingofvalueaddedproductsfordomesticconsumptionandexportisimportantforUganda’seconomyandAfricaingeneraltorealizeMillenniumDe-velopmentGoals.

Thepapergivestheoverviewofmanufacturingandhowitcanbethedriverofgrowthandproductivity inotheractivities:agriculture, information-basedservices,finance,construction,logisticsandsoon.ItfurtherexplainsAfrica’srelativelyweakpositionandperformancewithreferencetodeterminantsofindustrialdevelopment,inparticu-larhumanresourcedevelopment,infrastructure,technologicaleffortandgovernmentpolicyframeworks.

AlthoughUgandahas takenmajor initiatives to improve theenablingenvironmentforprivate sector led industrialization, it is still facedwithmajorobstacles for sus-

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tainableindustrialdevelopmentandinvestmentsinthecountry.Thekeydriversforinvestment,productivityimprovement,andcompetitivenessallintheperspectiveofadvancingmanufacturingandvalueadditionandtheirlinkagetoglobalizationwerediscussed.

Itconcludesbyprovidingrecommendationstotheconstraintswhichinclude:Govern-menttorecognizethecatalyticroleofmanufacturing;considerfactorsforadvancingvalueaddition,productivityandstandardization;Formulationofstrategicpoliciesandadaptationofmoderntechnologies;andpromotionofclusterbasedapproaches.

Paper II:Mutambi,J.(2009).Institutional and Support Environment to Cluster Based Development Approach in Uganda.

Proceedingsofthe12thTCILearningClustersAnnualGlobalConference,13thOc-tober2009,Jyvaskyla,Finland

Duetoglobalizationandliberalization,thebusinessenvironmenthasbecomesocom-petitiveanddemandingintermsofquality,speedofresponse,priceandvolume.Mostof theSMEs inAfrica and inUganda inparticularhavenotbeen able to respondtothischallenge.UgandagovernmentwhilerecognizingthecontributionsmadebySMEs, like any other developing country has no choice but to provide policy andinstitutionalsupporttowardsdevelopmentofSMEs.Thispaperpresentstherelatedsupportinitiativesandinstitutionsandthekindsofsupporttoclusterbaseddevelop-mentapproachinUganda.

Itfurtherdiscussesthespecificareasthatneedtobeaddressedinorderforthesmallandmediumfirmstobecomecompetitiveandimprovetheirproductivityespeciallythoseinvolvedinmanufacturingactivitiesandservicessectorthroughclusteringcon-cept.Itconcludesbyrecommendations,amongthemstrengtheningnetworkingandcollaborationbetweenthefirmsandamongtheclusterkeyactors.

Paper III:Mutambi,J.,Byaruhanga,J.K.,Buhwezi,B.K.,Trojer,L.andLating,P.O.(2011).Transferring Best Practices for Uganda Technological Innovation and Sustain-able Growth

Proceedingsofthe2ndInternationalAdvancesinEngineeringandTechnologyCon-ference of Makerere University, 31st Jan-2nd Feb, 2011, Entebbe- Uganda. ISBN:978-9970-214-00-7

Uganda is not alone in the drive to promote Science,Technology and Innovation(STI)asameanstosocialeconomicdevelopment.PromotionofSTIishighontheAgendaofAfricanUnioncountries.Indicatorsareusefulnotonlyformonitoringglo-balscientificandtechnologicaldevelopmenttrendsbutalsoforformulating,adjustingandimplementingSTIpolicies.Scientificandindustrialdevelopmentevaluationsandpolicy-relevantassessmentsarebasedonrelativelysophisticatedcombinationsofstatis-ticsonscience,technologyandinnovation,suchasvariousinputs,outputs,andproc-

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essindicators.ThispaperindicateshowUgandahasnotbeenproducingprimarySTIindicatorslikemanyofotherAfricancountries.TheSTIindicatorspaperisaimedatprovidingprimaryindicatorsusingasurveyandquestionnairesmethodologytoevalu-atetheperformancesofbusinesses,institutionsandgovernmentagenciesinrespecttotechnologicalinnovations,humanresourcedevelopmentandtraining,expenditureonResearchandDevelopment,etc.

Thepaperdiscussedthecore indicatorsofResearchandDevelopment(R&D),andInnovation.Thepaperfurtherexploredthepotentialbenefitsofbusinessincubation.It concludes by indicating that most innovations take place in small and mediumenterprises,andthatmoresupportisneededforResearchandDevelopmentandin-novationactivities.

Paper IV: Mutambi,J., Byaruhanga, J. K., Buhwezi, B. K. andTrojer , L. (2010).Research on the State of Business Incubation Systems in Different Countries: Lessons for Uganda.

AfricanJournalofScience,Technology,InnovationandDevelopment,Vol.2,No.2,2010,pp.190–214.

Uganda, likeanyothercountry intheworldrecognizesandpromotesmicro, smallandmediumsizeenterprisesfortheirroleineconomicandsocialdevelopment.Alotofsupportprogramssuchastechnicalassistance,capacitybuilding-trainingprogramsandotherincentiveschemeshavebeenprovided,butthishasnotcreatedanimpactonbusinessgrowthandindustrialdevelopment.Onestrategyproposedtonurturenewventuresmallfirmsandfostertheirsurvivalandgrowthwhichcanleadtoindustrialgrowthisthroughbusinessincubation.

Inthispaper,anoverviewofthestatusofbusinessincubatorsindifferentcountries,developedanddevelopingwaspresented.TheroleplayedbybusinessincubatorswasdiscussedandthemainlessonslearnedforUgandansituationwerepresentedinthefinalpartofthispaper.

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4.1 Paper 1

Advancing Value Addition and Competitiveness through Standardization to Promote Manufacturing Joshua Mutambi

Abstract

TheManufacturingSectorisoneofthemainsectorsintheUgandaeconomyanditisdividedintoformalandinformalmanufacturing.Thetotalcontributionofthemanu-facturingsectortoGDPwas8.4percentin2006.(BusinessRegisterReport2006/07-UBOS). Overall there was an increase of 32% of the manufacturing businesses in2006/07 compared to2001/02 inUganda.Manufacturing is theprocess of takingresourcesandthroughpackaging,processing,fabricationand/orassemblytransform-ingtheresourcestoaphysicalproductdemandedinthemarketplace.

Thebusinessesinthissectorincludethoseengagedinthefollowingactivities:Process-ingofmeat,fishanddairyproducts;coffeeprocessing;grainmilling;teaprocessing;bakeryandmanufactureofotherfoodproducts;manufactureofbeverages&tobac-co;manufactureoftextilesandleatherproducts;sawmilling,printing&publishing;chemicalsandchemicalproducts;manufactureofplastics;manufactureofmetalprod-ucts;andmanufactureoffurniture.

Athrivingmanufacturingsectorisvitaltothedevelopingeconomiesandtheircitizensasmanufacturingbusinessesgenerate jobs,hence incomestosupportservice indus-triesandpublicservices.However,thesectorisfacedwithchangingchallenges,andadvancingvalueadditionandcompetitivenessthroughstandardizationwillrespondtothesector’svalueandopportunities,whichwillpromotehighperformancepractices,Science,TechnologyandInnovation,aswellasbuildingtheskillsofthemanufactur-ingworkforce.

ManufacturersinUgandaliketheircounterpartsintheregionfacestiffglobalcompe-titionandmustcontinuallyimprovetheirproductsandprocessestostaycompetitive.Theirsuccesswilldependoncontinuouslyintegratingnewtechnologiesandinnova-tions, adding increasing value to products, reducing waste to processes and havingaccesstoresourcessuchascapital,rawmaterialsandmostimportantlyahighskilled,flexibleandinvolvedworkforce.(Supplychain).

Tomaintainthegrowthofthemanufacturingsector,boththepublicandprivatesec-torsneed to respondbycreatingnewhighperformanceworkenvironments (infra-structuredevelopment)andprovidingflexible,responsiveeducationandjobtrainingprogramsthatarecompetency-based,responsivetothedemandsinarapidlychanginglabourmarketandaretiedtonewtechnologies,customerneeds,andevolvingproduc-tionprocesses.

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Fromthecommonlyavailableindicatorsandfactorsofcompetitivenessincompara-tiveframework,itisevidentthatmostAfricanbusinessenvironmentsstillhaveseriousshortcomingscomparedwiththeirinternationalcompetitors.Thispaperwilldiscussfactorsneededtoimproveproductivity,valueadditionandcompetitivenessfortheAf-ricanandtheglobalmarkets.Toachievemanufacturingthatmeetscustomerspecifica-tionsanddeliverydates(valueadditionandcompetitiveness),thepapersuggestsbroadbenchmarksandinitiativesthatarelinkedwiththesolutionofproblems.

Keywords:Clustering;Competitiveness;Innovation;Manufacturing,Valueaddition

1. Introduction

Since the industrial revolution, manufacturing has helped define economic devel-opment. Manufacturing is the process of taking resources and through packaging,processing,fabricationand/orassemblytransformingtheresourcestoaphysicalprod-uctdemandedinthemarketplace.Indevelopingnations,manufacturinghasconsistedprimarilyofprocessingrawresourcesintosemi-processedgoods.Thesegoodsarethenfurtherprocessedintoproducts.Theadditionalprocessingusuallytakesplaceinareasclosetothemarketplaceresultinginaclusteringoftherequiredtechnology,capital,services,managementandworkforce.Overtimethiscentralizationofvalueaddedpro-ductionmaderegionsandcitieswithlargeurbanpopulationsstronginmanufactur-ingdevelopmentwhiledevelopingnationsremaineddependentonprimaryresourceproduction.

Manufacturinghasbeen,andremains,themainengineofstructuraltransformation.WhileitscontributiontoGDPinmostcountriesreachesapeakat30-40percentandthendeclinesasmodernservicesgrow,itscontributiontodevelopmentismuchmoresignificant.ItisthiscontributionthatAfricahasfailedtotap.Manufacturingiscriti-cal tochangingandmodernizingAfrica’seconomicstructure.It is themainavenueforapplyingnewtechnologiestoproductionandforraisingtechnicalandmanagerialcapabilities.Itiscrucialtoraisinganddiversifyingexports,movingtheregionfromits continueddependenceon lowvalue-addedandunstableprimaryproducts. It isnecessarytocreatenewskills,workattitudesandinstitutions.Anditcanbethedriverofgrowthandproductivityinotheractivities:agriculture,information-basedservices,finance,construction,logisticsandsoon.

ThemanufacturingsectorinUgandaisstillveryyoung,smallanddependentonim-portedgoods.Itischaracterizedmainlybyprocessingofagriculturalrawmaterialandproductionofbasicconsumergoods.Around40percentofallmanufacturingfirmsareengagedinagro-industries,onlyveryfewareoperatingincapitalgoodsindustriesoftenwithratherlowvalueadded,therestareinindustriessuchasplastics,steelandconstructionproducts(Mugisa2004,24-5).Thesectorispreliminaryconcentratedonsmallmanufacturing,productionforthedomesticmarketandbylittlestandardiza-tionofproducts,thusbeingaffectedbyspecificmarketcharacteristicssuchassmallmarketsize,highlevelofsmuggling,andinsecurityintheNorth.Afewhavesuccess-

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fullypenetratedregional(Rwanda,Burundi,easternCongo)markets,orglobal(EU,USA)markets.Thoseengagedinforinstanceneighboringmarketsaregenerallywellawareofregionalcompetitivefactorsandgraduallyseektoenhancetheircompetitiveposition.TherecentopeningofbusinessopportunitiesinsouthernSudanhasresultedinafairlyactiveandstrategicresponse.

Manufacturinghasundergonesignificantchangeinaneraofglobalcompetition,newinformationandproductiontechnologiesandcorporatere-structuringforeconomicuseofresources.Forgovernments,industryassociationsandcommunitydevelopmentorganizationsseekingtofostermanufacturingsectordevelopment,akeylessonistheabilitytotakeacoordinatedandsustainedapproachtonecessaryconditionswhichwillgreatlyincreasethechancesofsuccessinexpandingthesectorinordertostaycompeti-tiveorimprovecompetitivenessintheglobalmarkets.(Dr.AleefSuleman-2005)

Competitivenessinthiscasemeanstheabilityofenterprisestotakeadvantageoftheopportunitiesofferedbyglobalizationtrends.Societyhaschangedfromaclosedmar-ketandaclosedmanufacturingplacetoanopenone.Itisnolongernecessarytohavecentralized manufacturing facilities. Functions could be distributed. Designs couldbedoneinFrance,manufacturingdoneinMexico,Malaysiaorsomeothercountrywhere thecostspossiblycouldbekept low;productionplanningcouldbedone inUSA,marketingstrategiesevolvedinHongKongandservicepartsproducedinChinaorSouthAfrica.Suchaglobalization leads toa cross culturaldialoguebetween re-gionalblocks,governments,corporations,societiesandmostimportantlyindividuals.Manufacturingresearchershaveconcentratedonmanufacturingprocesses,materialsandmethods.Thoughthesearestillextremelyimportant,itisbecomingincreasinglyapparentthatwealsoneedtofocusontheadditionaldynamicswhichisaresultofglobalizationandinformationexplosion.

Weneedtobeawareoftheprocurement,productionanddistributionalongwiththefeedbackasthemaincomponentsofmanufacturinglifecycleinthisglobalizationproc-essandinordertoaccomplishthis,itisnecessarytobeawareofthecurrenttechnolo-gieswhichincludesrequiredstandards.(Standardizationistheprocessofdevelopingandagreeingupontechnicalstandards.Astandardisadocumentthatestablishesuni-formengineeringortechnicalspecifications,criteria,methods,processes,orpractices)

Globalizationhasshiftedtheparadigmformanufacturing.Thecustomerisinvolvedwiththemanufacturingoftheproduct.Themostimportantcharacteristicsofmanu-facturingduetoglobalizationare:

• Customersinvolvedwiththeproductionofthepartfromcradletograve(fromdesigntousage:lifecycle)

• Customershaveaccesstodatainstantly

• Customershaveaccesstodifferentmanufacturers

• Expertsneedtocooperateandcollaboratewiththecustomers

• Customerswillgetwhattheyhaverequested.

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ThebasisforUganda’sfutureprosperityanditsabilitytoinvestintheimprovementsdesiredwilldependonthecompetitivenessofitsexistingandfutureindustries.Com-petitivenessisnotdefinedastheabilityofthecountrytocompeteonthebasisofitsrawmaterials,costoflabororotherdomesticresourcecosts.Rather,itisbasedontheability to strategically position the industries in attractivemarkets andwith attrac-tiveproducts;andthiscanonlybedonebyadvancingvalueaddition,promotehighperformance and governing practices, Science,Technology and Innovation, as wellasbuildingtheskillsof themanufacturingworkforce.Anexample isMozalProjectSchemeinMaputo–Mozambique(MasakiMiyaji,2007)

Key Drivers for Investment:

Theprivatesectorwillhavetoadoptamorecompetitiveapproach,focusingonhighervalueproductsandservices,wherevalueisaddedbecauseofbettermarketlinkages,asthemainoutputs.TheclassicindustrialengineeringdefinitionofValueAddedis,“actionsoractivitiesthatchangetheform,thefit,thefunctionoftheproductbeingmanufacturedand,thisisimportant,thechangesaresomethingthecustomeriswill-ingtopaytohavehappen.”

Inaddition,Productivity,whichissimplydefinedasthevalueperunitofinput,thebetteruseofhuman,capital,andnaturalresourceswillallbeincreasinglythedeter-mining factors forUganda’s successandtheregionaswell. Individualfirmscannotbecomecompetitiveandstaycompetitiveintheglobalmarketontheirown;buildingcompetitivenessinvolvessustainedchangethroughoutthevaluechain:Thisclosein-terplaybetweenfirms,theirsuppliersandthebusinessenvironmentiswhycompeti-tivenesstheoristsandpractitionersfocuson“clusters”asthelocusofaction.

April 2003June 2000Operation start④

June 2001May 1998Construction start③

280,000 tons

Maputo/MozambiqueLocation②

Production Capacity

Business

Mozal Phase 2Mozal Phase 1Mozal S.A.R.L

Aluminium Ingot Smelter①

US$710 MilUS$1,200 MilTotal Cost⑦

Mozambican Govt

IDC

BHP Billiton

Mitsubishi Corp

⑫

⑪

⑩

⑨

⑧

⑥

25 ％

Shareholders & Equity

47 ％

24％

4％

Supplied from South AfricaElectricity Supply

AP35（ Pechiney Technology） ---Upgraded in 2006 from AP30Reduction Technology

1,135 （ as of Aug 2006）Employee

Supplied from AustraliaAlumina Supply

Pro-rata basisAluminium Ingot Offtake

280,000 tons⑤

April 2003June 2000Operation start④

June 2001May 1998Construction start③

280,000 tons

Maputo/MozambiqueLocation②

Production Capacity

Business

Mozal Phase 2Mozal Phase 1Mozal S.A.R.L

Aluminium Ingot Smelter①

US$710 MilUS$1,200 MilTotal Cost⑦

Mozambican Govt

IDC

BHP Billiton

Mitsubishi Corp

⑫

⑪

⑩

⑨

⑧

⑥

25 ％

Shareholders & Equity

47 ％

24％

4％

Supplied from South AfricaElectricity Supply

AP35（ Pechiney Technology） ---Upgraded in 2006 from AP30Reduction Technology

1,135 （ as of Aug 2006）Employee

Supplied from AustraliaAlumina Supply

Pro-rata basisAluminium Ingot Offtake

280,000 tons⑤

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Clusters are “geographical concentrations of interconnected companies, specializedsuppliers, serviceproviders,andassociated institutions inaparticularfield”(Porter,1998) .Associated institutions might include: educational and training institutionsthatbuildtheworkforce;researchinstitutionsthatgeneratescientificknowledgefortechnological change; banking and financial institutions; government institutions,whosepoliciesandpracticeshaveanimpactontheindustryincludingstandardsde-velopersandregulators(NationalBureausofStandardsorCommissionsofStandards);andprovidersofinfrastructure,bothpublicandprivate.

The ability of African countries to develop competitive manufacturing sectors willthereforedependonthequalityofAfricanbusinessenvironments,and labor forcesrelativetothoseoftheexportpowerhousesofthedevelopingworld.Thus,toadvancemanufacturing competitiveness, numerous major bottlenecks need to be addressedthatwillfocusonmanufacturingmodernization,includingpolicyuncertainty,pooraccesstofinance,insufficientenergysupply,slowtechnologytransfer,focusedtrainingandgeneralbusinesssupportwithgovernanceasacross-cuttingtheme.

2. Status of Manufacturing Sector in Africa

ManufacturingsectorsinmostAfricancountriesremainsmallcomparedtootherde-velopingcountriesandhaveremainedinwardlookingwiththeexceptionofMauritiusandrecentlyMadagascar.ForthesampleofAfricancountries,growthinmanufactur-ingovertheperiod2000–2002,wasintherangeof3-5%rangeannuallywiththeexceptionofMozambiquewhichgrewatover9%.InMozambique,highgrowthratescouldbeattributedtoMega–investmentsincapitalintensiveprojectslikeMozal.Inaddition,fewAfricanfirmsexportat least20%oftheirsales,particularlygiventhesmallersizeoftheirdomesticmarkets.

Generally,themanufacturingsectorinAfricaischaracterizedbythesmallersharecon-tributioninGDPthantheaverageLDCs,smallersizeofmanufacturingexportthantheaverageLDCsandasmallercontributionofthetextileindustry.Themanufactur-ingdevelopment inAsia (East andSouthEastAsia), for instance, started from thetextileindustryandshiftedtothecapitalintensiveandtechnologicallysophisticatedindustries (i.e.Automobile and electric appliances industries).TheAsianLDCs in-comelevelsarequitesimilartotheAfricancountries,yetAfricancountrieshavelaggedbehindinindustrialdevelopment.Isthedifferenceinbusinessenvironment,humancapital,orindustrialpolicies?

Aftertradeliberalization,massiveimportshavebeenrealizedinAfricanmarkets in-cludingthosefromSouthAsia.AfewcountrieshadrealizedincreaseinexportsduetoFDI,buthavesincestagnatedorreducedatallinothers.Therefore,freetradehasnotfacilitatedgrowthinlocalfirmsinAfricaunlikeinAsia.Inaliberalizingworld,exportsuccessisagoodindicatorofindustrialcompetitiveness.ThetablebelowshowsselectedeconomicindicatorsfromtheWorlddevelopmentindicatorswhichgivesthefiguresandclearlycanbeseenhowlowlevelsofpercentagesofGDPareformanufac-turinggrowthandexportsofAfricancountries.

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SlowgrowthandlowexportlevelsinmanufacturingimplythatAfricanfirmsarechar-acterizedbylow(thoughvarying)levelsofcompetitiveness.Thisisborneoutinthedataonspecificobstaclestofirmdevelopmentandisalsoillustratedbyanumberofbroaderbenchmarks.

Valueaddedperworker(Y:L),thetraditionalmeasureoflaborproductivityY:Lisnotameasureoftheintrinsicproductivityofworkersoradirectbenchmarkofsuccessorefficiency,inpartitreflectsthelevelofcapitalintensity.

CapitalintensitymeasuresthesuccessofAfricancountriesinfosteringlabourintensivemanufacturing along the lines of their potential competitive advantage in low costlabour.It’snotedthatcapitalintensivecountrieshavesmallerlaborcostsasashareoftotalcosts.

Inaddition,Africanfirmsusetheirlargequantitiesinefficiently;labourcostsareonecandidateforthesourceofAfricanfirms’lackofcompetitiveness,highcapitalinten-sityandlowefficiency.UnitLaborcostsmeasurestheaveragecostoflaborperunitofoutputdefinedinU.Sdollars,as(wL/Q)*1/e;wherewisthemanufacturingwage;Listheamountoflabouremployed;Qisthephysicalmeasureofoutput;andeistheexchangerate(domesticcurrencyperUSdollar).

Bydefinition,Unit labor costs arehigh in countries thathavehighwages and lowvalueaddedperworker.Foracountrytohavelow(competitive)ULCithastodoacombinationofthreethings.

(i)Keepnominalwageslow,

(ii)Keepitsexchangeratecompetitive,or

(iii)Increaseitslaborproductivity.

 

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Fromtheabovediscussions,thefollowingfactscanbeconcluded;• Africanfirmsfacerelativelyhighlaborcostsrelativetoproductivity

• AggregatecostsacrossAfricaneconomiesareveryhigh,pushingupfirms’costsandpushingdownworkers’realwageincomes.

• Africanworkers’realwageincomesareinfactverylow

• LaborcostsaccountforarelativelysmallshareofthetotalcostsofAfricanfirms.

Therefore,Competitivenessmustcomefromincreasedproductivityandlargelyfromlowernon-laborcostsandgreaterdevelopmentofworkerskills.Emphasisonimprov-ingproductivitymust include thebusiness environment factors thatdriveupnon-labor costs anddrivedownproductivity inAfrica. Such factors are associatedwithweak financial systems, macroeconomic instability, concentrated market structure,infrastructureandservicedeficiencies,overregulations,corruption,andpoorsecurityinsomeareas.

3. Enabling Environment: Necessary Conditions for Invest-ments and Exports in Africa

ThePolicies,institutions,andinfrastructuremaintainedbyAfricangovernmentsandtheeffectstheyhaveontransactioncostsarecrucialinencouragingordiscouraging,firm specific learning and the development of competitive advantage and exportsindustries.This sectiondiscusses thedifferent aspectsof the enablingenvironment,includingfinanceandmacro-economicstability;marketstructure,infrastructure;hu-mancapital;andGoodgovernanceandpolicies.

PILLARS OF GROWTH

POLICY CO-ORDINATION

Macro-econom

ic certainty

Market A

ccess

Adjustm

ent Support

Infrastructure

Adequate finance and credit

Higher Investment

Improved Technology

Skills development

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3.1 Access to and cost of Finance

OneofthemostimportantbottlenecksfacingindustrialfirmsinAfricaisaccesstoreli-able,inexpensivefinancing.Byandlarge,comparedwithotherdevelopingnationssay,EastAsia,ChinaandIndia,mostAfricanfirmshavelessaccesstoloansandoverdrafts,usemoreinternalfunds,andretainedearningtofundinvestmentsandoperatingcosts,paymuchhigherinterestrates,andarerequiredtoregistermanymoreassetsascol-lateral.Marketfailuresarerampant,smallfirmsarelesslikelytogetloans,cashflowproblemsareenormous,asfundsaretiedupinrawmaterials,finishedgoodsinvento-ries,overduepayments,andrefundsowedbythegovernments.Weaknessinbankingsector,supplier-creditfacilities,poorinformation,communicationandweakcontractenforcementhaveledtoaheavilycashbasedenvironment.Ugandanfirmsstillreportserousdifficultieswithfinance.Interestratesandcollateralrequirementsarestillveryhighcomparedtootherdevelopingnations.However,someAfricangovernmentsandthegovernmentofUganda inparticularareprogressively tryingtoaddress someoftheseconcerns.

3.2 Macro-economic certainty

AlthoughmostAfricancountrieshavemade themostprogress inbasicmacroeco-nomicstabilization,therearemanymorethathavealongwaytogoinbuildingmacro-economic environments conducive forprivate sectordevelopment.Theuncertaintygeneratedbyrapidandvariableinflationandexchangeratevolatilityincreasestransac-tioncostsandhamperstheabilitiesoffirmstoplanforthefutureinAfricacomparedtootherdevelopingcountrieswhereinflationandexchangeratevolatilityarelowandexternalbalancesarestable.ThisaffectsproductivityandcompetitivenessofAfricanfirms.

Tofix themacroeconomicuncertainty, goodmonetarypolicies shouldbe inplace:(exchangeratepolicy,interestratepolicy,andgovernmentborrowingpolicy),Fiscalpolicy-by limiting tradepricedistortions andhave taxpolicies, strengthenbankingsector,strengthencommercialcourtsandcontractenforceability,andcreationofin-dustrialfinanceinstitutions.

3.3 Market access and adjustment Support

TheManufacturing industry inAfricancountrieshas facedbothmarketaccessandadjustmentconstraints; suchas lackof inputsandcosts,high local focus, lowpro-ductivity, limited exports, andhighcompetition.Market access andcompetition iskeyinproducingefficientoutcomesandincentivesforvalueadditionandinnovation.Africanmarketshaveremainedhighlyconcentrated,duetodemandconstraints,i.e.lowincomes,highinterestrates,un-sophisticatedconsumers,andlackofmarketing.

However,someAfricangovernmentshavemadesomeprogressinadvocatingforin-creasedmarketsizeandaccess;andestablishmentofindustrialparks,ExportProcess-

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ingZones,andrecentlypromotionofindustrialclusterstoaddressproductionofsuffi-cientandhighqualityvolumesfortheincreasingmarkets,whichinturnrequirelargeramountsofrawmaterials.Therearenowsomemarketaccessopportunities,suchasAGOA,EU-EBA,andregionalmarkets,(EAC,COMESA,SADC).

3.4 Infrastructure Constraints

ThereisadireneedofcompetitiveandproductiveinfrastructureinAfrica.Economicsparseness is a considerable obstacle to thequality of infrastructure services on thecontinent,butitisclearthequalityofmanagementofinfrastructuresystemsmakesabigdifferenceaswell.Thesectorhassufferedgreatlyduetopoorserviceproviderssuch as electricity, and railway transport. The most recent progress has been madeintelecomindustrywherethesuccessfulincorporationofprivateprovidersofcellu-larinfrastructureinUganda,Mozambique,Kenya,Zambiaandothercountries,hasextendedcoverageand improved servicequality significantly.The leastprogresshasbeenmadeinelectricitygenerationandsupplywithsevereconsequencesforindustrialfirms.Deficientelectricityserviceseverelyhurtscompetitiveness.

Manyfirmshavetheirowngenerators,butthecostofprivatelysuppliedpoweristwoorthreetimesashighasthatofpublicgrids.Insometypesofproduction,especiallyofcontinuousprocessitemslikeplasticsandsoap,theunexpectedcessationofpowercanleadtoweeksoflostproductionwhilemachinesarebeingcleaned.

Littleprogresshasbeenmadesofar.Ugandahasmovedforwardwithrestructuringandhasredesignedpoliciestoallowsomeprivateparticipationinenergydevelopmentbuttheeffectsareyettobeseen.Furthermore,domestictransportcostsareveryhighinAfrica,andhurtexporters’competitiveness.Itismoresevereforlandlockedcoun-trieslikeUganda,ZambiaandBurundi.

3.5 Labor force skills and human capital development

TheQualityoflaborforceandtheaccumulationofhumancapitalarejustasrelevantforcompetitivenessasisphysicalinfrastructure.ManyAfricancountrieshavedifficul-tiesinretaininghighlyeducatedworkersorattractingskilledexpatriates.Itsobservablethat increasingefficiency is akey tofirmsbeingable toenterexportmarkets, suchefficiencywillbe linked toobservable skillsfirmsposses, amountof educationandtenureoftheworkforce.

4 Concluding Discussion and Lessons for Uganda

(i).Tobecompetitiveindomesticandinternationalmarkets(exportmarkets),firms/countriesneedtoadvancevalueaddition,standardizationandproductivityby;

• Absorbingtechnologyfromthedevelopedcountries,eitherbyattractingFDIsorim-provementofthebusinessenvironment

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• Upgradingoftheproductionsystems,introducenewhigh-techequipmentandcleanertechnologies,employingskilledandexperiencedhumanresourcepersonnel,investinskillsdevelopment,R&Dfornewproducts,andimproveonqualityofproducts.

• Encouragesub-contractingtermsfromlargecompaniestosmallandmediumfirms.Labourintensiveindustries,includingserviceindustriesmustalsobeencouragedasitimprovestheconditionsfortransfersoftechnologyandknow-how.

• Investinmarketingresearchandmarketinformationsystems

• Policysupportandharmonizationoftechnicalstandardsandregulations,becausestandardshaveincreasinglybecomecrucialelementsinfacilitatingtransactionsandtradewithinandbetweencountries.

• Establishanationalfinancingfundandsupportinstitutionstofacilitatethecommer-cializationofR&D.

(ii).Thecatalyticroleofmanufacturingindustryneedstobeacknowledged.Itisvitalorcenterforthefollowing;

• Applicationoftechnologicalprogresstoproduction,

• Innovation,

• newskillsandattitudes,

• moderninstitutionsandlegalstructures,

• beneficialexternalitiesfrominnovationandskillcreationforotheractivities,

• directdemandstimulus,

• internalizationoftheeconomy,and

• modernizationofnationalindustrialenterprises

(iii).Modernizationofequipmentsandstrategicpolicies:Intheadvancedcountries,wherealltheabovementionedconstraintshavebeenaddressed,anewtechnologyoranewapproachtomanufacturingandwayofdoingbusinesshasbeenadapted.Thisisthecomputerintegratedmanufacturingdevelopedin1974byJosephHarrington,(AdvancedManufacturingTechnology,2002).Itencompassesalloftheactivitiesandprocessesnecessarytoconvertrawmaterialsintofinishedproducts,deliverthemtothemarket,andsupporttheminthefield.Theseactivitiesincludethefollowing:

• Identifyinganeedforaproduct

• Designingaproducttomeettheneeds

• Obtainingtherawmaterialsneededtoproducetheproduct

• Applyingappropriateprocessestotransformtherawmaterialsintofinishedproducts

• Transportingproductstothemarket

• Maintainingtheproducttoensureproperperformanceinthefield

Technology,measurementsorstandardsarebasicindustrialneeds.Cooperationandcollaborationremainkeytodevelopingtherequiredtoolsandcapabilities.Inmodernmanufacturing,integrationisaccomplishedbycomputersandthebenefitsareasfol-

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lows:Productqualityincreases;Leadtimesarereduced,directlaborcostsarereduced,productdevelopment timesare reduced, inventories are reduced,designquality in-creases,andoverallproductivityincreases.

(iv).Promotionof cluster based industrial development:Anew approach todoingbusinessandeconomicdevelopmentplanningtocontinuallybeabletocompeteglo-ballyhasbeen introduced.This is the IndustryCluster concept.Theclustermodelemphasizesinternallinkages,wherebyclustergainsarefurtheredbylocalfirmcoop-eration,localinstitutions,andlocalsocialcapital.Externallinkagesalsomatter,globalbuyerscanhelplocalclustersaccessdistantmarkets,acquirenewformsofknowledgeandupgrade.

Porterarguesthatitisthecompetitionbetweenrivalfirmsintheclusterthatdrivesgrowthbecauseitforcesfirmstobeinnovativeandtoimproveandcreatenewtech-nology.This,inturn,leadstonewbusinessspin-offs,stimulatesR&D,andforcestheintroductionofnewskillsandservices.

Localproximitytofirmsinallaspectsoftheproductionprocess,suchasthesuppliers,machinebuilders,assemblers,distributors,andfinalcustomersallowsthecooperatingfirmstoadoptnewtechnologyandinnovationsrapidly,thereforeincreasingtheoverallefficiencyof theproductionprocess.This approachnotonly emphasizes growthofmanufacturingsectorbutalsomoreimportantlyconcomitantgrowthofthesupport-ingindustrieswhichincorporatetheservicessector

Inshort,clusterdevelopmentisattributabletoseveralkeyfactors,includingtechnol-ogytransfer,knowledgetransfer,developmentofaskilledlaborforceinrelatedindus-tries, thebenefits of agglomeration economies, and social infrastructure.Therefore,governmentsshouldbuildmultilayeredregionalsystems,toencourageclusterforma-tionsandthecreationofhighvaluechains.

Inconclusion, toadvancemanufacturingcompetitiveness,numerousmajorbottle-necksneedtobeaddressed;manufacturingmodernization,policyuncertainty,pooraccesstofinance,inadequateinfrastructure,focusedtrainingandgeneralsupporttoNationalbureausofStandardsandotherrelatedstandardsserviceproviderstoachieveinternational standards equivalency (Accredited labs, skilled standards officials, andharmonizedregulationsandconformitystandards).

References:1. BennEifert&VijayaRamachandran.2004:Competitivenessandprivatesectordevelopment

inAfrica2. Chang,Y.(2002).AdvancedManufacturingTechnologiesandChangesinWorkOrganiza-

tion.Science,TechnologyandPolicyInstitute3. HitoshiShoji.2007:ComparativeAnalysisonInfrastructureDevelopmentSouthEastAsia

andSub-SaharaAfrica4. Mugisa,E.2004:Uganda’sCompetitivenessintheEACandCOMESARegion,Reportfor

thePSFUandUPTOP

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5. MasakiMiyaji.2007:ExperiencesandInstructionsofFDI(ForeignDirectInvestmentinMozalProject,Mozambique

6. ReportontheUgandaBusinessRegister2006/077. Suleman,Aleef.2005:GenericproblemsexperiencedonAfricancontinent.

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4.2 Paper II

Institutional and Support Environment to Cluster Based Devel-opment Approach in Uganda

Joshua Mutambi

Abstract

Similartootherdevelopingcountries,UgandarecognizestheabilityofMicro,SmallandMediumscaleenterprisestogeneratesocio-economicbenefits,valueadditiontolocalrawmaterials,andemploymentgeneration.Toenhancecompetitiveness,innova-tionandnetworkingwithinproducerfirms,clusteringconceptneedstobepromotedandstrengthened.Clustersdriveproductivityandinnovation.Clustersaregeographi-calconcentrationsoffirms,suppliers,supportservicesproviders,infrastructure,pro-ducersofrelatedproducts,andspecializedinstitutionsthatariseinparticularfieldsinparticularlocations.

Clusters can be initiated or emerge spontaneously based on market forces and theprocessofclusterformationwilloccurnaturallyasnewfirmsform,suppliersdevelop,infrastructure investments respond to local needs, and specialized institutions andfirmslocatetheiroperationsinthegrowingclusterareaandgrow.Thisthereforecallsforpolicyandpublicattention.

Thekeyactorsintheclusterdevelopmentarereferredtoas“triplehelix”:Governmentfor policies and support institutions; Private sector –business enterprises, large andSMEs,NGOs’andFoundations;andAcademia–Universities,andR&Dinstitutions

Thispaperhighlightsanumberofmeasuresthatgovernmenthasdoneaimedatstimu-latingeconomicgrowthwithademonstrationoffacilitatingtheclusterbaseddevelop-mentconceptinUganda

Keywords: Clusters; Institutional Support; Small-Medium Enterprises;Triple-Helix;Uganda

1. Introduction

Clusters commonlyknownas geographical concentrationsof interconnected enter-prisesandassociatedsupportinstitutionsarefertileenvironmentsforthedevelopmentofinter-firmlinkages,asspatialproximityandsharedbusinessinterestfacilitatecol-laboration.

TheGovernmentofUganda(GOU)emphasizesonenhancingtheperformanceofthelocalbusinesscommunitywhilealsopromotingthe transferof skillsandknowhowtotheentirevalue-chainactorsthroughthePublic-PrivatePartnership.Initspursuittoachievehighandsustainableeconomicgrowthandprosperity forAllUgandans,

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theGOUhastheresponsibilitytocreateconduciveenvironmentforinvestmentandgrowth(PEAP)

Inrecognitionof the importanceof small scalefirmsthat require initial support toenterfar-reachingbusinessnetworks,thegovernmenthasinitiatedvariousappropri-atepoliciesandprograms.AsamemberoftheEAC,it’sstipulatedintheEACTreatyaswell.Article80(1)(c)oftheTreatyfortheEstablishmentoftheEastAfricanCom-munityprovidesthatoneofthestrategyandpriorityareasforregionalcooperationininvestmentandindustrialdevelopmentintheEACregionshallbefacilitatingthede-velopmentofsmallandmediumscaleindustriesincludingsub-contractingandotherrelationsbetween largerandsmallerfirms.Tomethat is theclusterbasedconcept,whichshouldbetakenadvantageof.

Thereisapoliticalwilltopromoteclusters;thegovernmenthighlysupportsresearch-ersandscientistsinareasthatarerelevanttotransformingtheeconomy.GOUrecog-nizesthatScienceandtechnologyarekeyintheimprovementofhealth,agriculture,industrialdevelopment,economiccompetitivenessandenvironmentalsustainability.”Forinstance,everyyearanationalscienceweekisheldtoraiseawarenessonthees-sentialroleofscienceandtechnologyinUganda’ssocio-economicdevelopmentandtoawardprizestothebestinnovativerolemodelsincludingmedicaldoctors,teachers,technologists,researchers,engineers,nutritionistsandscienceandtechnology-relatedentrepreneurs.

2. Related Support Initiatives to Cluster-Based Development Approach

Basedontheabovepolicystrategies,thegovernmentwishestostrengthentheSMEsorfirmswiththecapacitytoacollectivevisionoftheopportunitiesavailabletothem,andseizetheseopportunitiesthroughcoordinatedcollectiveinitiatives.Thefollowingprogramsandinstitutionsareinplaceexplicitlyintendedtopromotecapacitybuild-inginformalorinformalincome-generatingactivitiesatthenationalaswellasatthelocallevelsofgovernment.Theareasofsupportinclude;accesstofinance,accesstoknowledgeandskills,andotherslikemarketingaccess.

Theidentifiedexistingprogramsandinstitutionssupportingtheoperationsofcluster-basedfirmsandindividualfirmsincludingassociationstoimprovetheireffectivenessamongothersare;

a) The Competitiveness and Investment Climate Strategy (CICS)

The Competitiveness and Investment Climate Strategy (CICS), 2006-2010 UnderMinistryofFinance,PlanningandEconomicDevelopment.TheCICSwhosethemeis ‘Enhancingcompetitiveness throughPublic-PrivatePartnership’ seeks topositionUgandatodealwiththenextgenerationofcompetitivenesschallenges,bybuildingonearlierefforts to improvethebusinessenvironment,boostdomesticactivityandincreaseparticipationintheglobalmarketplace.Italsoemphasizesthedevelopment

68

andfacilitationofclustersasastrategy.CICShasorganizedtheclusterforumgroupmeetings, the fourthonewasheldrecently inaugust todiscuss thepopularizingofclustersdevelopmentconcept.

b. Presidential Science awards (2004)

In2004,H.EthePresidentofUgandaYoweriMuseveniintroducedthePresidentialscienceawardstopromotethedevelopmentandapplicationofscienceandtechnologyforeconomictransformation.ThefirstPresidentialScienceandTechnologyExcellenceAwardswerepresentedtowinningscientistsin2006.Thesecondsetofawardswasan-nouncedin2007andpresentedtothewinnersattheclosingceremonyoftheNationalScienceWeekin2008.

Achievementsinscientificandtechnologicalinnovationandapplicationinthefieldsofagricultural sciences,veterinarysciences,military sciences,natural sciences,engi-neering,biotechnology,earthsciences,medicalsciences,spacesciencesandinforma-tionandcommunicationsciencesarealsorecognized.Thereisapotentialofhavingtheseresearchersattachedorassistingclustersinallthesefields.

c. Prosperity for All Programme

InordertoimprovisefinancesandcapacitybuildingforanumberofpeopleinruralareasthePresidentofUgandainitiatedtheProsperity for All Programmebeinghisvisiontotryandputinplacevariedbutintegratedsocio-economicprogrammesthatmainlytargettheruralpoorinordertotransformthemintoproductiveandprosperouscom-munities.Itisprosperityforallthroughproduction,valueaddition,agro-processing,improvedmarketing,savingsandaccessibilitytoaffordablecredit.

This programme today has enabled the creation and development of a number ofSMEsinboththeUrbanandRuralareasasithasenhancedresourceaccessibilitybothfinanciallyandsocially.

d. Microfinance Outreach Plan- Ministry of Finance, Planning and Economic Devel-opment

MicrofinanceOutreachPlanisamajorinitiativeofGovernmentofUgandaandStake-holdersinmicrofinanceindustry.TheMatchingGrantFacilityCapacity(MCAP),animportantcomponent,isintendedtofacilitateacceleratedgrowthofasustainableandworkingmicrofinance capacitybuildingmarketwithwell-informed consumers andbetterequippedsuppliersoftheservices.

Thiscomponentisintendedtoexpandtheoutreachoffinancialservicestoruralareas.Theinterventionswouldinvolvethepenetrationofruralareastoincreasethepresenceand accessibility, of MFIs and financial services, as well as developing, testing andpromotionofnewproductstomeettheneedsofsmallholdersandruralcommunities.

e. One Village One Product (OVOP) program - Ministry of Tourism, Trade and Industry (MTTI)

MinistryofTourism,TradeandIndustry(MTTI),throughitsDepartmentofIndustryandTechnology,mandatedtopromote,expandanddiversifyanenvironmentallysus-

69

tainableindustrialbaseincollaborationwithitsstatutoryinstitutions,suchasUNBS,UIRI,MTAC,haslaunchedandestablishedaninstitutionalmechanismtopromoteandcoordinateOneVillageOneProduct(OVOP)programthisyearwhichwillin-cludethecluster–basedapproachactivities.Cluster-baseddevelopmentapproachtopromoteSMEswasapprovedintheNationalIndustrialPolicy(2008).ThemodalitiesofcoordinationwillsoonbefinalizedbetweenMakerereandMinistry.

The(OVOP)programme(2009)isbeingimplementedthroughimprovingthepro-duction, value addition and marketing of Value added products that can competelocally, regionally and internationally by utilizing primary agro-products and natu-ralresourcesinwhichcommunitieshavecomparativeadvantages.Thisprogramwillstrengthenthedevelopmentofclustersinthecountry.

It is built on threeprinciples, namely (i) self-reliance and creativity (ii) human re-sourcesdevelopment,and(iii)thinkinglocallybutactingglobally.Localpeopletakethelead,independentofexternalpromptingandlargelyontheirowncreativityandself-reliance, tomakeuniqueproducts fromlocal resources for theirowngoodandtocapturemarketsexternaltotheirlocality.Intheprocesstheydeveloptheirexper-tise through production of competitive products, their livelihoods improve due toenhancedincomes,andtheircommunitiesdevelopcloserbondsatthesametime.

WithreferencetovalueadditionandjobcreationtheGovernmenthaspromisedtosupportwherepossibleallsmallandmediumindustries/enterprisesintermsoftech-nology acquisition, skills development andmarket linkages.The clusterswill againbenefitoutofthisinitiative.

Additionally,asasigntoimproveagriculturalproductivityandagro-processing,Gov-ernment has allocated Ush60b to agricultural enterprises through the commercialbanks.

f. Private Sector Foundation of Uganda (PSFU)

PSFUisUganda’sapexbodyfortheprivatesector.Rightfromits inception,PSFUhasbeenGovernment’simplementationpartnerforseveralprojectsandprogrammesaimedatstrengtheningtheprivatesectorasanengineofeconomicgrowth.

PSFUrunsvariousprogrammesthatbenefitSMEsincludingclusterssuchas;theim-plementationoftheBusinessUgandaDevelopmentScheme(BUDS),EnterpriseSkillslinkageprogram,etc.

g. Enterprise Uganda

EnterpriseUgandaoffersacomprehensiverangeofintegratedandtailor-madebusi-nesssupportserviceswhichbeginwithdiagnosticStudiesonthebusinessespromotedbytheparticipantsincludingruraloutreach.The‘BusinessHealthCheck’isacomple-mentaryservicetotheparticipantstoestablishconstraintsthatmaybeholdingbacktherealisationoftheirbusinesspotential.Thepost-entrepreneurshipservicesincludegeneralmanagementtraining;exportmarketdevelopmentandsourcingofcreditandotherbusinessadvisoryservices.

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h. Uganda Export Promotion Board (UEPB)

UgandaExportPromotionBoardcoordinatesallactivitiesthatleadtoexportgrowthonasustainablebasis.Toaccomplishthis,theBoardcarriesoutmarketstudies,de-velopproductstosuitmarketplacerequirements,undertakepromotionalprogramsintargetexportmarkets,conductsexportertrainingforinternationaltrade,engagesinvariousexportpolicyformulationanddevelopmentactivitiesandgeneratescriticalmarketinformationforthecountry’sbusinesscommunity.

TheBoardfacilitatesSMEsandotherUgandancompanies’participationintradefairs,arrangestradesupportmissions,andconductsmarketstudiesandtrainingforexport-ersamongstvariousactivitiestopromoteexports.ItmanagesanInformationCentreforgenerationanddisseminationofmarketinformationtoSMEs.UEPBhasmostlybeenhelpingSMEsandtheclustersinthehandicraftandhoneysectors.

i. Uganda National Chamber of Commerce and Industry (UNCCI)

UgandaNationalChamberofCommerceandIndustry(UNCCI)istheumbrellaor-ganizationofthebusinessprivatesectorinUganda.Itdrawsitsmembersfromsev-eraleconomicandsocialsectorsincludingIndustry,Trade,Agriculture,TourismandServicesandAgriculturalProcessing.Theyhavehostedinternationalforumstocreatemarketlinkages,givebusinessdevelopmentgrants,andcapacitybuildingsupporttobusinesscommunity.

j. National Agriculture Advisory Service (NAADS)

Realizingtheimportanceofagriculturetotheeconomyandtoplacegreateremphasisonextensiondelivery,NAADSwasestablished.NAADSmissionistoincreasefarmer’saccesstoinformation,knowledgeandtechnologyforprofitableagriculturalproduc-tion.TheNAADSprogrammeoperationsareguidedbyCommercialization,FarmersEmpowerment,FosteringFarmersParticipation,IncreasingInstitutionalEfficiency,aswellasGenderMainstreaming.ThroughCommercialization,thefarmersareexpectedto shift fromsubsistence throughmarket-orientedproduction in themediumtermandultimatelytocommercialproductioninthelongterm.

Farmerparticipationinvolvesallcategoriesoffarmersidentifyingagriculturaladvisoryneeds, settingpriorities, formulatingplans, andmonitoring andevaluatingoutputsandoutcomes.

k. Uganda Investment Authority

UIAisaOne-Stopfacilitatorforinvestorsofvariouslevelsofinvestmentforeignanddo-mestic,mandatedbyanActofParliament(1991)toattract,promoteandfacilitateinvest-ment.UIAassistsinvestorsatvariouslevelstoexpedientlyimplementtheirbusinessplans.Assuch,UIAmarketsUganda’sinvestmentopportunitiestotargetedinvestorsallovertheworld,coordinates thenational investmentmarketingprogram,monitors inter-national investmenttrendsandservesas thefirstandmostcomprehensivepointofcontactforinvestorsinUganda.

AmongtheservicesrenderedtoSMEsbyUIAincludebutnotlimitedto,

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i.HelpingSMEstoimplementtheirprojectideasthroughprofessionaltrainingandadviceandassistanceinlocatingrelevantprojectsupportservices;

ii.AssistingSMEsinseekingjointventurepartnersandfunding;

iii.Ensuringprotectionforintellectualpropertyandtradesecretswheretechnologytransferisinvolved;

Thefollowingclustershavebenefitedinonewayoranotherfromtheaboveinitiatives;

KatwemetalFabricators,Jinjamaize-millers,LuweroBasketryandhandicrafts,Textileandgarments,Lirabeekeepers,etc.

3. Discussion and specific areas of focus

(i)Thereisneedtocreatestronginstitutionallinkagesatvariouslevels.Networkingisoneofthemostimportantinfrastructuresinclusterdevelopment.Theacademicinsti-tutionsshouldseriouslysupportthebeneficiariesoftheaboveprogramsintechnologyevaluation,managementsupportandconsultingservices.

(ii)MarketingassistanceforexportableproductsarebeingextendedbytheMinistrythroughholdingtradefairsandexhibitionsorsupportingpotentialfirmstoattendthemajorexhibitionslocallyandinternationally.

(iii).TheMinistryisdevelopingtheStandardsandQualityPolicythatwillgivestra-tegicguidanceinproductstandardizationandcertification.However,theUNBSandUEPBaretheretofacilitateanddothenecessarymeasuresinrespecttoStandardsandqualitycontrol,andmarketingoftheproductsinternationallyrespectively.

(iv)Needtosupportforinfrastructuredevelopment,(i.e.energy,transport,water,etc)andthePublicPrivatePartnershippolicy

(v)StrengtheningoftheStandardsandtestinglaboratoriesinfrastructureforindustrialcompetitiveness

4. Conclusions

• AClusterinitiativeisanorganizingmechanism,focusingoncollaborativeactivitiestoupgradethecluster’scompetitiveness

• Clusterinitiativesarecomplementarytoindustryassociations,andnotcompetitors

• Fortransformation,allproblemsarewellknownwhatisrequiredistofocusandaddressthem

• Emphasisshouldshiftfromstrategicplanningtostrategicdoing

• Asthegovernmentandothersupportorganizationsareimplementingtheclusterdevel-opmentindifferentprogramsandapproaches,theroleoftheacademiaindevelopmentoftheclusterconceptneedstobescaledupmoretosupportresearchandinnovation.

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6. References1. GovernmentofUganda(GOU)-“BudgetSpeechFinancialyear2009/10”bytheMinistryof

Finance,PlanningandEconomicDevelopment.2. GOU-“NationalIndustrialPolicy2008”byMinistryofTourism,TradeandIndustry3. GOU-“MinisterialPolicyStatement2009/10”bytheMinistryofTourism,TradeandIndus-

try4. MinistryofFinance,PlanningandEconomicDevelopment,CompetitivenessandInvestment

ClimateStrategy(CICS),2006-2010,December20065. MinistryofFinance,PlanningandEconomicDevelopment,PovertyEradicationActionPlan

(PEAP),2004/5–2007/8,December20046. UNIDO,UgandaIntegratedIndustrialPolicyforSustainableIndustrialDevelopmentand

Competitiveness,2006

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4.3 Paper III

Transferring Best Practices for Uganda Technological Innova-tion and Sustainable Growth Joshua Mutambi, Joseph. K. Byaruhanga, Bernard K. Buhwezi, Lena Trojer, Peter Okidi-Lating.

Abstract

Uganda,likemanyotherAfricancountrieshasnotbeendevelopingprimaryscience,technologyandinnovationIndicatorsandtomakethemaccessibletopublicandpri-vatesectordecisionmakersforsocialeconomicdevelopmentandinvestmentpurposes.Indicatorshavenotbeengivenseriousattentionasenginesoflong-termdevelopment.

Thispaperreportstheresultsofaresearchundertakentodevelopasetofrelevantsci-ence,technologyandinnovationIndicatorsforUganda.Fromapopulationof7,336firms,300firmsweresampledforinnovationsurveysand200institutionsfortheRe-searchandDevelopmentsurvey.Thedatacollectedwererepresentedintablesandwasgrossedup.DataentrywastakeninCSPROandtheanalysiswasdoneusingSTATAstatisticalsoftware

ThereisaglobalperceptionthatbusinessesindevelopingcountrieslikeUgandaaregenerallydominatedbySmall andMediumenterprises; and that iswheremost in-novationswerehappening.ThispaperwilldiscussthecoreindicatorsofResearchandDevelopment(R&D)andInnovation;theempiricaldataofthestateofUganda’sSci-ence,TechnologyandInnovationIndicators.Thepaperfurtherexploresthepotentialbenefitsandthebestpracticesinincubationprocess.

Themajorconclusionsare;prioritizingscienceandtechnologypolicywillcreatemoreopportunitiesandbuildcapabilitiesforinnovationsandtechnology.Themonitoringofindustry,governmentanduniversityR&Dprogramsiscrucialtosuccessfulpolicymakingandanalysis.

Keywords:BusinessIncubation,InnovationIndicators,ResearchandDevelopmentIn-dicators,TripleHelix,Uganda

1 INTRODUCTION

1.1 Background

Ugandaisanagro-basedlandlockedsmallopeneconomycountrywithapopulationofabout30millionpeople.Withitsendowmentofnaturalresourcesandsalubriousclimate,Uganda’sindustrialprofileisstilldominatedbyagro-industryandnotinnova-tionled.However,thegovernmentisaggressivelypromotingvalueaddition,competi-tivenessandindustrializationaswhole.Boththeoreticalandempiricalliteratureshowsthat ahighdegree of efficiency in the industrial sector can contribute to increased

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production,product innovation,highvaluemanufacturedexportsandhigh foreignearnings.Itisthroughindustrializationthatwealthcanbecreatedandhigherincomesrealizedfromnaturalresourcesandrawmaterialstransformation.Thisrequiresasetofcorecompetencessuchasskilledhumanresource,technology,accesstofinanceandinfrastructurewhichenablecompetitivetransformationofinputsintooutputs(prod-uctsorservices)whichcanbetradedinmarkets.Technologyoffersthepossibilityforincreasedquality,productivity,speedtomarketandthepotentialforsatisfyingunmethumanneeds.

1.2 Measuring Science, Technology and Innovation Indicators

Innovationisnotaonewaysequenceunleashedbyscientificdevelopmentonly,butratheraninteractiveprocessthatlargelyexceedstheboundariesofformalR&Dactivi-ties.Innovationrequirestalentandtalentismobilewhichcanbeattractedanywhereintheworld.Thedevelopmentofnewinformationandcommunicationtechnologies(ICTs)opensupunprecedentedopportunitiestoensureuniversalandaccesstoscien-tificdataandinformationtoenhancetheglobalknowledgepool.Thisnewperspectiveofinnovationprocessiswellcapturedinthesocalled“OpenInnovation”accordingtoChesbrough(2003).

Evaluationsandpolicy-relevantassessmentsarebasedonrelativelysophisticatedcom-binationsof statisticsonR&Dand innovation, suchas various input,output, andprocessindicators.WiththerecentlydevelopedNationalDevelopmentPlan(NDP),2010forUgandaandherVisionof”AtransformedUgandan society from a peasant to a modern and prosperous country within 30 years”,Uganda’sindustrialdevelopmentcanbebestassessedwhenputinthecontextofglobaltrends.AchievingtheNDPstrate-gies, the New Economic Partnership for African Development (NEPAD) Consoli-datedPlanofAction,etc.involvesfocusingonperformanceofoutputs,outcomesandimpact.Thecomparisoncanbedisconcertingbutwithoutarealitycheckitishardtoappreciatewhatisathandandtheremedialstrategiesrequired.

1.3 Problem Statement

Science,TechnologyandInnovationIndicatorsarecrucialformonitoringglobalsci-entificandtechnologicaldevelopment trends. Indicatorsareuseful for formulating,adjustingandimplementingSTIpolicies.UgandalikemanyotherAfricancountrieshasnotbeendevelopingprimaryscience,technologyandinnovationindicatorsandtomakethemaccessibletopublicandprivatesectordecisionmakersforsocialeconomicdevelopmentandinvestmentpurposes.Withoutindicators,littlewillbeknownaboutR&Dactivities,statusofinnovation,performanceandpositionofthestatewithinlo-calandglobalmarketswillbemissing

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1.4 Main Objective

Thepurposeofthisresearchwastodevelopandestablishasetofrelevantscience,tech-nologyandinnovationindicatorsforUganda.ItwillmakeimportantcontributionstobothintellectualunderstandingandbroaderpracticaldevelopmentsforSTIpolicy.

2. METHODOLOGY

2.1 Study Approach

ThesurveyfollowedtheFrascatiManualGuidelinesandOsloManualdevelopedbytheOrganizationforEconomicCo-operationandDevelopment(OECD).Thesurveywascarriedoutthroughinterviewsintheformofquestionnairesforbothqualitativeandquantitativequestions.Thequalitativequestionscoveredinformationaboutprod-uctandprocessInnovationaswellasorganizationalandmarketinginnovation,sourceofinformationandpartnersinR&Dandinnovationactivities.Thequantitativeques-tionscoveredthebasiceconomicinformationoftheinstitutionorbusiness,theexpen-ditures,numberofpersonnel,theoutputsandsales,amongothers.Thoughthesurveywasbothqualitativeandquantitative,thepaperhasfocusedonthequantitativeresults.Apopulationof7,336firmsforthesurvey,coveredyears2006,2007and2008.

2.2 Sampling Method

ThesamplingframewastheVATregister,formalsector.Theaverageannualturnoverwasthestratificationvariableforsize.ThesampleforR&Dhadasectoralcoverageof9sectors:AgricultureandFishing;MiningandQuarrying;Manufacturing;Electric-ity,gasandwater;Trade;Transport;FinanceandInsurance;Realestateandbusinessservices;Community,socialandpersonalservices.

Atotalof300businessesweresampledforInnovationsurveyswhileatotalof200in-stitutionsincluding,Government,NGOS,Highereducation&ResearchInstitutions,andbusinesssector/PrivatecompaniesweresampledfortheR&Dsurvey.

ForGovernmentbothbudgetaryandnon-budgetaryinstitutionsweresampled.

2.3 Data Collection

Threedifferentquestionnairesweredesignedtocoverthefollowing;

Business,Government,NGOsandPublicInstitutions,UniversitiesandResearchIn-stitutionsforResearchandDevelopmentsurvey.ForHigherinstitutionsoflearningquestionnaireswereadministeredtospecificselectedfacultiesinbothpublicandpri-vateuniversities;andresearchInstitutions.

TheapproachtomeasuringinnovationandResearchandDevelopmentindicatorswasbasedonempiricalsurveyresultsfrompublicandprivatesectorsandacademiawith

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structuredquestionsincludingsizeofthefirms,technologicalinnovation,expenditureonR&D, sourceof funding, researchersby sectorand factorsconstraining innova-tions.Stakeholderworkshopswerealsoconductedin2009/10.

2.4 Data Analysis

Questionnaireswerecheckedforcompletenessandconsistenceandinformationwasrequestedfromrespondentswherefurtherclaritywasrequired.

DataentrywastakeninCSPROandtheanalysiswasdoneusingSTATAstatisticalsoftware.

Thedatacollectedwererepresentedintablesandwasgrossedup.Oncedatawasana-lyzed,itwasmatchedwiththeavailabledatafromotheradministrativedatasourcesandthiswasthefirstmajorinnovationandR&Dsurveyinthecountry.

3. RESULTS

Thefollowingparagraphssummarizetheresultsoftheinvestigationthroughsurveys.

(a)InnovationSurveyIndicators

(i)NumberofInnovativefirmsbyemploymentsizeTable 3.4: Number of Innovative firms by employee size

EmploymentSize InnovativeFirms Non-innovativefirms

2006 2007 2008 2006 2007 2008

Between1-9 904 996 936 674 396 316

10-49 928 952 1,103 1,375 1,447 1,813

50-249 382 489 526 1,614 1,713 505

>250 108 110 110 0 52 182

(ii)Percentageshareoffirmsthatintroducedinnovationsandperformed R&DamonginnovatorsTable 3. 5: Percentage share of firms that introduced innovations and performed R&D among innovators

ProductIn-novation

Processinnovation

ServiceIn-novation

PerformedR&D

Percentshareoffirmsthatintroduced 28.2 7.5 11.8 9.5

(iii)TotallynewtotheUgandanmarket(product,serviceandprocess)by year

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Table 3. 6: Percentage share of firms that introduced totally new to the Ugandan market and their turnover by year

Year 2006 2007 2008

Shareinpercentages 45.3 50.2 68.4

PercentageTurnOver(UGX)ofInnovativebusinesses 53%(outof1.6bn) 48%(outof2.8bn) 60%(outof2.5bn)

(b)ResearchandDevelopmentSurveyIndicators

(i)GrossDomesticExpenditureonR&D(GERD)asanIndicatorofR&D Activities-inUganda(2007)Table 3.7: Gross Domestic Expenditure on R&D (GERD) as an Indicator of R&D Activities-in Uganda

(2007)

Total

BusinessSector

(BERD)

Government

Sector

(GOVERD)

HigherEducation

(HERD)

PrivateNon-Profit(PNPERD)

incl.donors

(GERD)bySectorofPerformance 359.8 14.8 165.5 179.5 -

PercentageShares 100.0 4.1 46.0 49.9 -

BySourceofFunding 100.0 4.2 37.1 46.0 12.8

ResearchersbySectorofEmployment 100.0 5.0 50.2 45.0 -

R&DpersonnelbyOc-cupationTotal(HC) 1768 89 889 790 NA

(ii)GERDbyTypeofR&D:-BasicResearch10.2%,appliedresearch 59.3%,Experimentalresearch30.5%

4.0 DISCUSSIONSurveyresultsandanalysisrevealedthatUgandaneedstodomuchmoreinsupportingresearchandtechnologicalinnovations.Ugandaisgrosslydeficientintechnologyandlacksadequate indigenouscapabilityof technologicalmasterly.Therehasbeen littleattentionpaidtothegenerationofminimumlevelofindigenoustechnologynecessarytoabsorbtechnologyfromforeignsourcesandadaptthemtogaincomparativeadvan-tageinthemarket.Observedalsoisculturaldeficienciesinentrepreneurship,lowlevelofcompetitiveness,concertedpolicymakingeffortsnotwithstanding.Thereareotherbottlenecksthatmustbeaddressed, like inadequate infrastructure, limitedaccesstocredit,weakindustrialsupportinstitutions,etc(GOU,2008)

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Inrespecttomeasuringscience,technologyandinnovationindicators,therearenowmany indicators of activities such as, knowledge creation (R&D performance andfunding), knowledge transfer (invention, innovation,), knowledge use (diffusion ofknowledge,technologiesandpractices),andknowledgeinfrastructureandgovernance(thedevelopmentofhumanresourcesforallofthese)(NEPADOST,2006).

ThecommoncoreindicatorsofResearchandDevelopmentare:(i)Researchers(headcount);(ii)GrossDomesticExpenditureonResearchandDevelopment(GERD)ac-tivitiesbysourceoffunds,performancesectorsandtypeofresearch;(iii)R&Dper-sonnelbylevelofqualificationandfunction(iv)Researchersbygenderandfieldofstudy;(v)Government,highereducationandbusinessenterpriseexpenditureonR&D(OECD,2002)

Thecoreindicatorsofinnovationinclude:firmgeneralinformation;productandproc-essinnovations;organizationandmarketinginnovations;innovationactivitiesandex-penditures;sourcesofinformationandcooperation;effectsofinnovationandfactorshamperinginnovationactivities;andintellectualpropertyrights(OECD,1997)

ComparingtheinnovativeperformancewithrespecttotheemploymentsizeasinTa-ble3.1and3.3,asageneralobservationmostinnovativefirmshadfewerthan50em-ployeesaccordingtothesurvey.Thereisaglobalperceptionthatbusinessesindevelop-ingcountrieslikeUgandaaregenerallydominatedbySmallandMediumenterprises

SomeofthecountriessuchasthoseinNorthandSouthAmerica,EuropeanUnion,China,Asiantigers,andSouthAfricathathavepromotedResearchandDevelopment,incubationandgrowthofinnovativefirms,haverealizedthebenefitsoftechnologicalinnovation,scienceandtechnologydevelopment.ThiscanbeobservedintheWorldEconomicForumreports,theGlobalCompetitivenessIndexreports,andtheNEPADAfrica’sScienceandTechnologyConsolidatedPlanofActionof2005.

Uganda,althoughtheresultsarestilllow,itisprogressivelyincreasingsupporttosci-enceandtechnologydevelopment.ThiscanbeexplainedbythenumberofforeigndirectinvestmentsthathasincreasedinUgandasince2005,andalsobythegovern-ment’spolicyonliberalizationandimprovementoftheconditionsofdoingbusinessinthecountryandtherecentlysupportfromthegovernmenttoresearchanddevelop-mentasindicatedinTable3.4.

WithrespecttoR&DindicatorsinTable3.4,suchasNo.ofR&DpersonnelagreeswiththedatagivenbytheUgandaNationalCouncilofScienceandTechnology;andUnited Nations Educational, Scientific and Cultural Organization (UNESCO), inS&Tdatabase2007indicatedthatGERDas%ageofGDPforUgandawasinrangeof0.00-0.25;Researcherspermillioninhabitantswasbetween0–100.,AsreportedbytheWorldEconomicForum,UgandahassomegoodscientificresearchinstitutionsgeographicallyconcentratedinandaroundKampala

Alsofromthedata,intheUgandansituation,theproductandserviceinnovatorsshareoffirmswasfoundhigherthantheshareoffirmsthatintroducedprocessinnovation.ThisanalysisconcurswellwiththeGlobalcompetitivenessIndex2007whereUganda’s

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economywasrankedfairlywellininnovation(position73,)andinmarketefficiency(position85).(Wagneretal,2008).

In respect to transferringbest practices, traditionallyUganda’s universitieswere in-volved in education and basic research, but have recently become engaged in sup-portingbusinessdevelopmentactivities, suchasbusiness/technology incubators.Toincreaseentrepreneurialtalentandsupportoutstandingideas,theyhaveundertakencurriculumdevelopmentforcoursesonentrepreneurship,coordinatedbusinessplancompetitionsaswellasprovidingentrepreneurialoutreachprograms.Thisispartoftriplehelixinproblemidentification,solvingandstrategicbrokeringthatcharacterizetechnologytransfer,collaborationandopeninnovation.

Toguidegovernmentsupportmeasures,themostrelevantpoliciesinrespecttotech-nological innovation and industrial sustained growth that have been put in placeinclude; the National Industrial Policy-2008; Science, Technology and InnovationPolicy-2009;TradePolicy-2007;EnergyPolicy,harnessingandutilizationofInforma-tionandCommunicationTechnology,Ugandahas inadditionadoptedtheAfricanScience,TechnologyandInnovationIndicatorsInitiativeunderAfricanUnioncoordi-natedbytheNewEconomicPartnershipforAfricanDevelopment(NEPAD).

BasedonthedefinitionofOpenInnovation“that valuable ideas can come from inside or outside the firm and can go to market from inside or outside the firm as well as they look to advance their technology”(Chesbrough,2003),tofosterinnovationandpromoteen-trepreneurshipdevelopmentinbusinessincubatorsforopeninnovation,thepotentialbenefitsarefrom:interactiveanddynamiccapabilitiesthroughknowledge,technologyandmarketexchangesunboundedandatlowcostfromusers,employees,suppliers,customers, researchers,etc.Newknowledge, skillsandserviceswillbe incorporatedanddiffusedinamoresignificantway.Differentfirmsduringthesurveyhaddifferingcapabilitiesforinteractionandthisresultedintominimizingtherisks,maximizingin-novationoutcomes,skillsenhancement,andcollaboration

Businessincubatorsrelatetointernalandexternallogistics,commercializationsystemsandsupportserviceswhichrespondtorequirementsofjobcreation,improvedproduc-tivity,rapidproductintroduction,entrepreneurialdevelopment,industrializationandeconomicdevelopment.

Thestudyshowsthatthebestpracticesinincubationprocessincludesbutnotlimitedto;selectinggoodlocationandplanningfunctionalbuildings;buildingadedicated,trainedmanagementteam;selectingpotentialentrepreneurtenants;identifyingstrongsponsors;mobilizing investments for incubatorsandtenants;Addingvaluethroughqualityservicesfortenantcompanies;creatingstronglinkagestoprofessionalandbusi-nesscommunities;monitoringperformanceandassessingimpact;andaclearmissionandstrategicplanningforthefuture.

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5. CONCLUSIONS

Fromtheresearchfindingsandanalysis,itcanbeconcludedthatthisaimofdevelop-ingindicatorshasbeenachievedandcanbeimproveduponbyaseriesofothersur-veys.TheinformationcompiledcanbeusedtoimprovetheexistingpoliciesandSTIstrategies.ForUgandatobuild incrementaldomestic technologycapacityand localinnovators,

• itwillrelyonthedevelopmentofarobustpublic-privatepartnershipdomainforsuf-ficientfunding.

• Adoptbestpracticesintechnologytransfer,suchastheuseofindicators,andthereportstocoverindigenousinnovationstatusaswell

• Toimproveontheawarenessandthequalityofthedataforinternationalcomparisons,publishanddisseminatetheresults

• Thereisneedforadequatefinancialresourcesfortechnical,statisticalandanalyticalcapacityandtoolstoaidplanning,managementandmonitoringofthesectorbasedonsoundevidence.ItwillalsobepossibletojointlymonitorandanalyzetherelationshipbetweenR&D,innovation,productivityandotherdimensionsoffirmperformances.

6. REFERENCESChesbrough,H.(2003),Open Innovation: The New imperative for Creating and Profiting from Tech-

nology,.Boston:HarvardBusinessSchoolPress,2003,ISBN:1-57851-837-7.Gault,F.(2008),Science,Technology and Innovation Indicators: Opportunities for Africa,African

StatisticalJournal,Vol.6,141-162.GovernmentofUganda,(2008),National Industrial Policy: A framework for Uganda’s transforma-

tion, competitiveness and prosperity,MinistryofTourism,TradeandIndustryChesbrough,H.,Vanhaverbeke.W.andWest.J,eds.(2006),Open Innovation: Researching a New

Paradigm.Oxford:OxfordUniversityPress,.ISBN:0-19-929072-5.NEPADOST,(2006),African Science, Technology and Innovation Indicators (ASTII) Towards African

Indicator Manuals:ADiscussionDocumentSummaryOrganizationforEconomicCooperationandDevelopment,(2002),Frascati Manual: Proposed

Standard Practice for Surveys on Research and Development,Paris:ISBN:92-64-19903-9.OrganizationforEconomicCooperationandDevelopment/Eurostat,(1997),Oslow Manual:

Proposed Guidelines for Collecting and Interpreting Technological Innovation Data.ParisandLuxembourg:

TheWorldEconomicForum:TheGlobalCompetitivenessReport2010TheRepublicofUganda,(2010):National Development Plan, 2010-2014:MinistryofFinance,

PlanningandEconomicDevelopment-Wagner,C.S.,Farley,S.E.,(2008),Science & Technology for Growth and Development: From

Case Studies to Policy for African Countries, SRI International Technical ProjectFinalReport(P18045)

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4.4 Paper IV Research on the State of Business Incubation Systems in Different Countries: Lessons for UgandaJoshua Mutambi, Joseph K. Byaruhanga, Lena Trojer, and Kariko B. Buhwezi

Abstract

SmallandMediumsizedenterpriseshaveproventobecapableofcatalyzingnationaleconomiesowingtotheirhighgrowthpotential,theirroleinpromotinginnovations,employmentcreationandeconomicdevelopment.However,intheearlydaysoftheirgrowthperiod,thesefirmsfacedifficultiesthatmayleadtotheirfailure.Businessincu-bationhasbeenidentifiedasaneffectivegrowthmechanismforsuchentrepreneurialfirms.Thispapermainlylookedattheconceptanddescriptionofbusinessincubation,developmentprocessandcontributionofincubatorstostart-upfirms.Itexaminedtheimpacttoregionalentrepreneurshipandeconomicdevelopmentglobally.Thepaperconcludedbyhighlightingtheexisting incubators inUgandaand identifiedrecom-mendationsforstrengtheningthebusinessincubationinUganda.

Keywords:BusinessIncubationSystems;SMEs,Entrepreneurship;IndustrialDevelop-ment,LeastDevelopedCountries,LDCs,Sub-SaharanAfrica

JELClassification:O55,O14,M13

1. Introduction

SmallandMediumEnterprises(SMEs)havemoresignificantroleinimprovingeco-nomicgrowthandindustrialdevelopmentofnationsbycontributingtothecreationofemployment,incomegenerationopportunitiesandwealth,promotionofentrepre-neurshipandenhancingofexports.Theyconstituteanimportantdimensionintheinnovationprocess(Beal,2003;Hammeretal.,1997;Byaruhanga,2005;Tirthankar,2007).Thepaper’sdiscussionisinformedbyreviewsofrelevantpublications,work-shopreports,surveyreportsandstakeholderdiscussionsinrespecttothecontributionofSMEs,andhowtheycouldbeenhancedtosustainablegrowththroughbusinessincubatorsthathavereceivedconsiderableattentionintheworld.

TheSMEsintheLeastDevelopedCountries(LDCs),wheremostoftheSub-SaharanAfrican countries fall, producing products and services with moderate quality, ap-plyinglowleveltechnologiesandfacedwithotherobstacleshavebeenfacingtoughcompetitionwiththeimportedproducts.However,globalizationhasopenedupnewbusinessesandmarketopportunities.IncaseofAfricanandparticularlytheSub-Saha-rancountries,theregionalintegrationprocessthroughvariousgroupingssuchastheCommonMarketsforEastandSouthernAfrica(COMESA),SouthernAfricaDevel-opmentCommunity(SADC)andtheEastAfricanCommunity(EAC)haveexpandedandstrengthenedthelinkageswiththeglobaleconomicstructuresandprocesses(UNOSAA,2009)

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Withinruralandsemi-urbanareas,thereoftenexistsignificantpressurestostartnewbusinesses,adoptnewtechnologies,andproduceproductsthatconformtostandardsrequiredbythemarketsandtothoseestablishedbytheregulatoryauthorities.How-ever, small andnewbusinesseshave severaldisadvantages thathinder their success.Theyhavedifficultiesinsecuringtheresourcestheyneedforsurvival(FergusonandOlofsson,2004).Becauseofthis,over80-90%ofthenewbusinessesstartedeachyearfailworldwidewithinthefirstfiveyearsofoperation(Aertset al.,2007).

Incubators have been considered as a remedy for the disadvantages that small andnewfirmsencounterbyprovidingnumerousbusinesssupportservices,andtheyareusefulinfosteringtechnologicalinnovation,entrepreneurship,commercializationandindustrialrenewal.Forthesereasons,mostcountrieshaveincreasinglybeenengagedinestablishingincubators(Akcomak,2009).

Thisresearchpaperaddressesthefollowingquestions:(1)Discusstheconceptualizationandtheoryofbusinessincubation

(2)Whataretheexperiencesandperformanceimpactsofbusinessincubatorsindifferentcountries?

(3)WhatlessonscanbelearntfromthedevelopedcountriesbytheLeastDevelopedcoun-tries,particularlyforUganda

The paper emphasizes Uganda which is situated in a region that includes some ofAfrica’smosteconomicallyimportantcountriesbutalsoamemberoftheLeastDe-velopedCountries in the Sub-SaharanAfrica as a case study.Uganda is amemberofEACcommonmarket,COMESA,WTOandotherinternationalbodies.UgandatodayhasagreatpotentialtobecomethekeyinvestmentandbusinesshubintheEastAfrican region. As new challenges and demands are derived from global economiccompetitiveness,anunderstandingofbusinessincubatorsandopportunitiesiscriticaltoprovidefuturedirectionfortheincubationprocess,requiredservicesanddesiresofentrepreneursinUganda.

DuetothekeystructuralconstraintstoIndustrializationinUganda,theroleoftheState in thesecircumstances is still veryvital as lessons learned fromthedevelopedcountries(UNCTAD,2009).Industrializationoffersprospects fortheexpansionofemploymentandincome.Atthesametime,ithelpstocreatetheideaontheinnova-tionandbettertechnologychangesthatbringsproductionimprovementtherebyac-celeratingthegrowthofproductivityandquality.AnewindustrialpolicyforUgandawasthereforeenactedin2008whichisattunedtotheneedsofdomesticenterprises,morecognizantoftheneedtobuildlinkageswithTransNationalCorporationsandtoleverageuntappedcommercialopportunitiesproducedbyuniversityresearch.

Thepaperthereforeisorganizedasfollows:asectiononentrepreneurshipandindus-trialization,literaturereviewonbusinessincubator’shistoricaldevelopmentandobjec-tives;statusofthebusinessincubatorsandtheirimpactintheWorld;theoverviewoftheattempttoestablishincubatorsinUgandaandsummaryoftherecommendationsandconclusions.

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Methodology

Thispaperisaproductofastudycarriedoutontheliteratureconcerningthedevel-opmentofbusinessincubatorsintheworldfromthepublishedmaterials,textbooks,conferencepresentationsandtheauthorsexperienceinIndustrialpolicyformulation,innovation systems and cluster development facilitating activities, and interactionsamongthetriplehelixactors.

Entrepreneurship and Industrialization

Industrializationisboththeprocessofbuildingupacountry’scapacitytoconvertrawmaterials intonewproducts and the system that enables production to takeplace.Theissueofentrepreneurshipanditsrelationshiptotheindustrializationprocesshaslongoccupied theattentionofdevelopmentplanners. Inparticular, thekey roleofmanufacturing industry for growth based mainly on technology driven increase ofproductivityand someessential co-factors, likehumanskills, capitalorappropriateinstitutionsisgloballyundisputed.

Arecentinternationalliteraturesuggestedthatoperatinginclustersmayhelpsmallen-terprisestoovercometheirgrowthconstraints(McCormick,1999).Creatingfavorableconditionsforentrepreneurshipdoesindeedhelptheprocessofindustrialization,andbusiness incubation focusing on national/regional strengths through clustering andnetworkingisbelievedtohelpsmallenterprisesgrowandcontributetoindustrializa-tion.Thereforesmallenterprisedevelopmenthasbeenlinkedtotheindustrializationprocess(McCormick,1999).

Whatisneededthusistocreatefavorableconditionstoachievetheaboveobjectives,and facilitating entrepreneurs will contribute to industrial development which is akeyroleofthedevelopmentalstate.Theemergenceoftheclusterbaseddevelopmentstrategy termed as “new innovation system” based on the cooperation among uni-versities (research institutions), industryandgovernmenthasbeenreportedtohavebroughtawiderangeof support servicesworldwide fordevelopmentofknowledgebasedbusinesses,withlinkagestouniversities,researchinstitutes,venturecapitalandinternationaljointventures.Clustersaffectcompetitivenesswithincountriesaswellasacrossnationalborders(Porter,1998).

Primarily, the capacity to access, adapt, disseminate andgeneratenew technologiesthatarecrucialforstart-upsandSMEshastobebasednotonlyonindustrialpolicybutalsootherrelatedandsoundpoliciessuchasScienceandTechnologypolicieswithdynamicsystemsofnationalinnovationinplace.

Thetiebetweenbasicresearch,scienceanddevelopmentcanalsobestrengthenedbyestablishingUniversityIncubators.ParticularlytheUniversityIncubatorscansupportthepotentialentrepreneursbyprovidingamentor,seedfinancing,networksandbusi-nesstraining.TheUniversitiescanprovideaccesstolaboratories,hightechequipmentandhighlyeducatedspecialistsinordertocommercializeacademicresearchbydevel-opingproductsorlicensingthetechnology(BeckerandGassmann,2006).

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2. Literature Review

Theoretical Conceptualization and Objectives of Business Incubation Process

Theterm ‘incubator’wasderived from the fundamentalmeaningof the term:Theartificial nurturing of the chicken egg in order to hatch them faster in a shelteredenvironment.Thesamehatchingconceptisappliedtotheincubatingofcompanies;itspeedsupnewventures’establishmentsandincreasestheirchancesofsuccess.Anincubatorthushatchesnewideasbyprovidingnewventureswithphysicalandintangi-bleresources(BeckerandGassmann,2006).Theyhavebeenoperatedbycommunitydevelopmenteffortsormunicipalorganizationstofueleconomicgrowthandjobcrea-tionthroughgovernmentfundingsincethe1960s.

Business incubationconceptrestsontheargumentthat ifweakbutpromisingnewbusinesseswithapotentialofgrowingintosuccessfulventurescanbeidentifiedatanearlystageandhelped,failures,lossofresourcescanbereducedandmoreideascanbedeveloped(Hamdani,2006).

Duringthepast3decades,States,regionsandcitieshaveinitiatedeconomicdevelop-mentprogramsaimedat:(1)maintainingindustriesandfirms,(2)recruitingestab-lishedfirmsfromotherareas,and(3)creatingnewindustriesandenterprises.Withrespecttothethirdobjective,therehasbeenaproliferationofbusinessandtechnicalassistanceprogramsaimedatincreasingtheformation,survival,andsuccessratesofsmallandmediumsizedenterprises.TheseincludeSmallBusinessDevelopmentCent-ers,SmallBusinessInstitutes,EnterpriseForums,University-basedentrepreneurshipcenters,specialprogramsofferedthroughChambersofCommerce,Businessincuba-torsandsoforth(Rice,2002).

Bycomparison,businessincubatorsoffertheopportunitytodeploymultiplemodesofassistance, includingcontinual interaction,becausecompaniesandthe incubatorstaffareco-locatedinthesamefacility.Thespectrumofservicesofferedbyanincuba-torisextremelyvaried,includingstrategicbusinessplanning,administrativeservices,technicalassistanceandguidanceonissuesofintellectualproperty,(particularlyinthecaseoftechnologyincubators),toconnectwithfinancingandnetworkingactivities,toinfrastructuralfacilities,etc.(Nolan,2002;Lalkaka,1997;EC-CSES,2002;Sunet al.,2007).

Business incubationisagloballywell-testedover50yearssystematicapproachwithdiverseobjectivesprimarilyaimedatgrowth-orientedstart-upenterprisestohelpthemgrow with the efficient use of business resources, to become sustainable and com-petitivecompanies.Forexample,accordingto(Nolan,2002;EC-CSES,2002;GBIN,2009)theseverydiverseobjectivesinclude:

1. Generatingemployment;

2. Commercializingideasanduniversityresearchwithspin-offcompanies;

3. Developmentofentrepreneurialcultureandsupportinginnovationsincommunities;

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4. Upgradingthetechnologicalstandingoffirmsinagivenlocality;

5. Encouragingyounggraduatestocreatetheirownbusinesses;

6. Improvingsurvivalratesfornewstart-upbusinesses;

7. Developmentofnewindustrysectorsandeconomicdiversification;

8. Expandingthesupplyofinfrastructure;

9. Empoweringthesociallydisadvantagedgroups;

10. Creatingexportrevenues,and;

11. Increasingcompetitivenessofanexistingsector.

Conceptually“Incubation”isamorediligentandplannedprocesstostrengthenclus-teringorco-locationoffirmsandthereforeneedsacarefulattentiontotheproblemsoftheprospectiveoccupants,extendingwellbeyondprovidinginfrastructureandofficeservices.Businessincubationisaprocessenactedbybusinessincubators,angelsandventurecapitalorganizationsinordertofacilitatetheentrepreneurialprocess(HackettandDilts,2004).

In2009,ofthetotal7,000worldwide,thenumbersinindustrializingcountriesaremorethanhalfthetotal,especially inChina,Korea,Taiwan,BrazilandMexico.InEurope,themajorityareinGermany,FranceandU.K.Whileincubatorsinindustrialcountriesserveavarietyofobjectives,thoseintheindustrializingcountriesarepre-dominantlyfocusedontechnology(Lalkaka,2009).MajorityoftheLeastDevelopedCountries’incubatorsaimatfosteringentrepreneurship,innovationsandvalueaddi-tion(manufacturing)inpromotingindustrialization(UNCTAD,2009).

Historical background of Business Incubators in the World

Overthe last50years,business incubatorshaveevolved indifferentways .Thefirstincubatorwasestablishedin1959inBatavia,NewYorkintheUnitedStates,butuntilthe1970s’thisconceptwasunique(WigginsandGibson,2003;HackettandDilts,2004).Sincethefirstincubatorswerefoundedinthelate1970sandearly1980s(thesocalled“Firstgeneration”or“traditionalincubators”(EC-CSES,2002)wascharac-terizedbyastrong“realestate”component),themainobjectivehasbeenandstillistonurtureentrepreneurialstart-upsthatwillgrowrapidly,createwealthandemploymentandcontributetolocalandregionaleconomicdevelopment.

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Figure 4: The Evolution of Business Incubator Model

Source: EC-CSES (2002)

Theearlierincubatorsfocusedtheireffortsonnewtechnologies,lightmanufacturingand services. Later, the “Second Generation” of incubators in the 1990s added oncounseling, skills enhancement,networking services,management,access toprofes-sionalsupportandseedcapital.However,astheindustryhasmatured,thetypesofbusinessesincubatedhavesignificantlybroadened(WigginsandGibson,2003).Thecomingoftheknowledge-basedbusinessincubatorsinthelate1990sandincreasingimportanceofuniversitiesinincubation,resultedintostrongdevelopmentofwhatanalystshavetermedasthe“ThirdGeneration”ofbusinessincubatorsheavilytechnol-ogyoriented.Fromthesehumblebeginnings,theincubatorindustryhasmaturedintoaninternationaleconomic-developmenttool.Figure1showstheevolutionofbusi-nessincubation.

Thereareseveraldefinitionsandapproachestobusiness incubatorsavailable inaca-demic literature and many have been adopted by Industry Associations and Policymakers indifferentcountriesreflecting localculturesandnationalpolicies.Mostofthemarecharacterizedbyaspecificphysicallocationandco-operationbetweenpub-licandprivatesectorinstitutionsintheformofactionsessentiallyaimedatbuildingbridgesbetweenacademiaandindustry,promotinginnovationinsmallandmediumenterprises(SMEs)andencouraginginvestmentintechnology–basedstart-upfirms.

Adescriptionofactivitiestheincubatorsperformaccordingto(UN-CE,2001;EU-CSES, 2002; Scaramuzzi, 2002; Hamdani, 2006; Rumen 2009; Akcomak, 2009;Chandra, 2007; Lalkaka, 1997; Zedtwitz and Li, 2004; Hackett and Dilts, 2004)definethatincubators:

           1970s            Early  1980s              Mid  1990s                Late  1990s  

Managed  workshops  

Enterprise  Agencies  

Industrial  estates  

Business  Centers  

Business  Incubator  Concept  

Science  Parks  

Multi  Purpose  incubators  

Specialized  Incubators  

Technology  Incubators  

Incubators  without  Walls  

Sector  specific  

incubators  

New  Economy  Incubators  

Virtual  Incubators  

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• Providesecure,affordable,flexible,wellequippedphysicalspaceincludingcommunica-tioninfrastructure;

• Provideprofessional,business,management,andtechnicalconsulting(inareaswheretheydon’thavetherelevantknowledgeandexpertise)servicestogetherwithaccesstoseedandworkingcapital,publicgrants,loanfinancing,venturecapital,andR&Dpart-nershipfunding,andstateequityfinancing;

• Areoftenassociatedorconnectedwithinstitutionssuchasuniversities,researchinstitutes,communities,consortiums,governmentadministrationcouncils,andNon-governmentorganizations;

• Createaninteractivecommunityofentrepreneurs,academicandbusinessintereststhatstimulateandencouragethesometimesfragileincubationprocess,includingthedisad-vantagedpopulation,andfinally;

• Themostimportantelementthatidentifies,incubatorsfromtherestofsimilarestablish-mentsisthatitprovideshighlevelbusinesssupport/managementservicesunderoneroofforentrepreneursandnewventuresthathavemediumandhighleveltechnologicalfocustocreatesynergy(Akcomak,2009).Theenvironmentwithintheincubatorcreatedthroughtheinteractionbetweentheincubatormanagersandincubatees,andamongtheincubateesthemselvesisseenbymajoritywritersasaveryimportantfacetofincubation.

Chien, (2007)describedabusiness incubatorasan innovativedevelopment toolofhumanresourcedevelopment(HRD)usedtofostergrowthanddiversifytheventurebase.Humanresourcedevelopment;networkingandknowledgeacquisition,adapta-tionanddisseminationthattakeplacewithinenterprises,universitiesandresearchin-stitutionssupplementedwithappropriatepolicieswillleadtothebusinessincubators’importanceinattainmentoftheirobjectives.

ThegeneraldefinitionofbusinessincubatorbytheNationalBusinessIncubationAs-sociationis1:

Business incubators nurture the development of entrepreneurial companies, helping them survive and grow during the start-up period, when they are most vulnerable. A business incubator’s main goal is to produce successful firms that will leave the program financially viable and freestanding. The most common goals of incubation programs are creating jobs in a community, enhancing a community’s entrepreneurial climate, retaining businesses in a community, building or accelerating growth in a local industry, and diversifying local economies.

Development and effective management process of business incubators

Inthe1980s,manyindustrializedcountriesandindustrializingcountriescreatedbusi-ness incubators inhopesof stimulating jobs, technologytransferandeconomicde-velopmentintheircommunities;somehavebeensuccessfulwhileothersthesuccesshasbeenslowornotthereatall.Thishasbeenduetoavarietyoffactors;suchasdif-ferencesinregionalcharacteristics,thepolicyandregulatoryenvironment,economicfactorsinplay,differentstakeholdersinvolved,cultureandattributesoftheincubatorfirms,thevisionoftheincubatorandthemodeofmanagement.

Chien(2007)studyconcludedthatthereisarelationshipwiththeroleofHRDintheincubatormanagementandtheeffectivenessofincubatordevelopmenttofulfill

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itsgoals.Confrontedwithlackoftrainedpersonnelandexpertiseinmanagingvariousstagesofthechangemoreresearchtostudythesuccessratesandtoanalyzethefailureshasbeendone.Incountrieswitheffectiveinstitutionalenvironment,goodpoliciesandorganizationalmechanisms,alotmoresuccessesofincubationsystemshasbeenreal-izedaswillbediscussedinlatersections.

Likeanyotherbusiness,thesuccessofbusinessincubatorsdependsontheincubatordevelopment,financing,effectivemanagementandperformanceprocess,andamongthe important factors in successful management of incubators is the cooperationamongvarietyofstakeholders(incubationnetworksystem).However,theroleofman-agementisfarmorethanprovisionofworkspaceinthefacility;itinvolvesalltypesofsupportthatwouldhelpthefirmstoflourishincludingfacilitatingemployeestraininginspecializedtechniquesandlinkageswithsupportinstitutionssuchasuniversityties.

Therefore,themissionandvisionoftheincubatorandhowitwillbeimplementedbyincubatormanagementisveryimportant.Thedrivingforceinincubatorprogramsisthesupplyofexpertise,capital,andsupportthatcomesfromassistanceactivitiesdi-rectedtowardsfillingthevoidsinentrepreneurs’abilities.Thus,thedevelopmentandperformanceofincubatorsisimportanttoentrepreneurs.Managementofincubatorscanaffectthefirms’survivalandgrowth.

Ingeneral,therearetwogroupsofincubators:profit(theseincubatorshelpthestart-upsbyofferingrentalspace,capital,financingsolutions,andbusinessmentoringetc.at subsidized rates) andNot for -profit (these incubators are setupbypublic andnonpublic-organizationsthatwishtopromotebusinessesinanarea,aspecificindus-try,economicallyempowerthedisadvantagedortopromotetheentrepreneurialspirit(spin-offs)atauniversityorresearchinstitute.).

Businessincubationisacross-cuttingprocessembracingarangeofcomponentsin-cludingbusinessandentrepreneurialsupportandfinance.Themodelisasshownbe-low:

IndevelopingcountriesandespeciallyinSub-SaharanAfrica,businessincubatorscanprovidethefollowingopportunities;

• Provideentryintobusinessandfinancialnetworks(connections)

• Createaregional“criticalmass”forruraldevelopment

• Builduponexistingentrepreneurialresources

• Builduponexistingprogramsforsmallbusinesses

• Onestop-shopfortechnicalmanagement,financialassistanceandimprovedworksite

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Figure 5: Business Incubator Model

Source: EU-CSES (2002)

ResearchonincubatorsdefinestheincubationprocessascomprisedofthreestagesPre-incubation,theincubationstageandthepost–incubation.Sincetheaimsofincuba-torsaretofosterinnovativeenterprisedevelopment,andcanbesuccessfullyfocusedoncreatingcompetitiveenterpriseswithhighjobcreationpotential,regardlessofwhetherornotthebusinessconceptisinnovative,theycanserveasimportantleverstoforgepositivechangethatcreatesamoreenablingenvironmentforinnovativeentrepreneursacrosstheeconomy.

However,thebestwayofachievingtheintendedobjectives,istohavemorecommuni-cationwithintheincubatormanagementandtenantentrepreneurialfirms.Itrequiresactivelinkagesbetweenfinanciers,academia,policymakersandthebusinesscommu-nity(Incubationsystem).Morefocusalsoshouldbeontheentrepreneurialincubationprocessandtheoutcome.ThishasthusresultedintheneedtoconsiderHRD2asanimportantpartof the incubatormanagementanddevelopmentprocess, and in theprocessoftechnologicalinnovationhumanresourcedevelopmentplaysasignificantrole in improvingtheeffectivenessofmanagementtechnologyand inachievingor-ganizationalobjectives(Chien,2007;WangandZang,2005).

 

Graduation  

Regional  Dimension  

Effectiveness  

Inputs   Process   Outputs  

Incubation  

Stakeholder  objectives  

Management  skills  

Finance  

Projects  

Sustainability  

Efficiency  

Relevance  

Impacts      

Target  market  

Admission  criteria  

Exit  criteria  

Utility  

Training   Business  advice  

Financial  support  

Technology  support  

After  care  

Physical  space   Networking  

AdditionalityDisplacement  

Indirect  effects  

Net  Impacts  

Operational  Dimension  

Impacts

s

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Significance of Business incubators

Lookingat the roleof incubators in theentrepreneurialprocess,WigginsandGib-son(2003)arguedthatincubatorsmustdofivethingswell inordertosucceed.(1)Establishclearmetricsforsuccess,(2)provideentrepreneurialleadership(3)developand deliver value-added services to member companies (4) develop a rational newcompanyselectionprocess(5)ensurethemembercompaniesgainaccesstonecessaryhumanandfinancialresources.

Whileinnovationisconsideredbymanyasthefoundationofgrowth,theinnovationprocessintheLeastDevelopedCountriesfollowsadifferentpattern.Itisnotaper-fectedoracommonoccurrence.Learningandinnovationmayarisefromavarietyofsources,suchasresearchanddevelopment(R&D-whichiscodifiedknowledge),tacitlearning–by-doing,investmentsinnewmachineryandequipment,technologysup-pliers,mobilityoflabouretc.Formanylow–incomeeconomies,especiallytheSub-SaharanAfrica,however theopportunities for industrial learninghavebeen limitedcomparedtothedevelopedmarketeconomieswherefirmsareheavilysupportedbyadensearrayofinstitutionalsupportinstitutionsthatbuttressinstitutionallearningonacontinuousbasis(UNCTAD,2009).

Byestablishingbusiness/technologyincubatorsandlinkingthemtoclusterinitiatives,itwillstimulatenetworkingamongfirms,especiallywithfirmslocatedclosetoeachother.Itwillalsoenhanceuniversity–industrycollaborationviauniversityincubators.Inestablishinglinkagesandcollaborationwithotherfirmsorinstitutions,firmscanoutsourceknowledgeandtechnology.

Therefore,promotionofincubationastheessentialtoolinclusterdevelopmentmakessense,asclusterdevelopmentstrategiescanconsidertheadequacyofavailablefacilitiesforthedevelopmentofidentifiedclusters.Theavailabilityofworkpremisesandbusi-nesssupportservicesforpotentialentrepreneursandexpansionofexistingbusinessesisanimportantcomponentofmaintainingthelong-termsuccessofacluster.

3. Status of Business Incubators and their Impacts in the World

Thelongtermevolutionofincubatorshasrevealedthattheconceptevolvedfromasimpletoolforeconomicdevelopmentintoahigh-tech,sectorspecificandincreasinglyprofit-orientedtooltopromoteentrepreneurship.Itisnowanacceptedpracticeacrosstheworldboth forestablishedeconomiesandemergingeconomies. TheEuropeanUnioncountries,Asiaandpacificcountries,MiddleEastcountries,NorthandSouthAmerica,includingAfricancountriesareimplementingbusinessandtechnologyincu-bationprogrammes.Thebusinessincubatorimpactsarethelongertermconsequencesofactivities,linkagesandoutcomes.Thesecanbegroupedintofivebroadareas;(1)launchingsustainablebusinesses,(2)jobcreation,(3)taxes,(4)socialimpact.3

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North America

TheNationalBusinessIncubationAssociationestimatesthatNorthAmericanincuba-tor clients andgraduateshavecreatedabout500,000 jobs since1980.Evenbetter,for every50 jobs createdby an incubatorgraduate, about another25 jobs are cre-atedinthecommunity.Incubatorgraduatescreatejobs,revitalizeneighborhoodsandcommercializenewtechnologies,whichstrengthenslocal,regionalandevennationaleconomies.

The1990s,witnessedfurtherdevelopmentofincubatorsthroughouttheUnitedStatesofAmerica,forinstance,in1981,therewere8incubatorsandby2000,therewere900incubatorsintheUS(Petersetal.,2004).

Regardingstart-upbusinesses,in2001alone,NorthAmericanincubatorshelpedmorethan35,000start-upcompaniesthatemployednearly82,000workersandgeneratedannual earnings of more than $7 billion with 900 incubators (Sally Linder/NBIA,2003)whileIn2005,assistedmorethan27,000businessesthatprovidedemploymentofover100,000workerswithover1000 incubators inoperation.Thereare120 inCanada,with2,958clientbusinessesgeneratedrevenuesattheendoftheyear2005,createdfullandpart-timeemploymentofover13,000people;theaveragesurvivalrateofcompaniesinCanadathatgothroughbusinessincubationhasbeenshowntobehigherthan80%afterfiveyears(CABI,2005).

Business incubation experience in other Regions

Incubatorsdifferedfromtheexistingindustrialparksandestatesasthefocusshiftedawayfromrealestatedevelopmentandsubsidizedrentstovalueaddedbusinessserv-ices.

European Union Region

The EU started supporting the development of incubators in mid1980s as part ofitsregionalpolicy.WhilstinitiallyEUfocusedonestablishingincubatorsin‘lagging’regions,inrecentyearsitworksmoreonincubatorsassupportforhighknowledge-intensivestart-upsaspartofthe‘LisbonAgenda’(EuropeanUnion-RegionalPolicy,2010).EUprogramsprovidingassistancetoincubatorsinclude:theEuropeanRegion-alDevelopmentFund(ERDF);EuropeanSocialFund(ESF);LeonardoProgrammemainlyfortraining;SixthR&DFrameworkProgramme,andothers.

TheexistenceofEU-widesupportnetworkssuchas,EBN(EuropeanBusiness&In-novationCentreNetwork),‘GatestoGrowth’,and‘ScienceAlliance’andthestrongNationalassociations suchas in,France,Germany,UK,FinlandandSwedeneffec-tivelypromotethegrowthofbusinessincubators.

PromotingincubationandgrowthofinnovativefirmsisalsosingledoutinEU2020strategy,proposedbyPresidentBarroso,asoneofthewaysofcreatingvaluebasinggrowthonknowledge.TheDeputyDirectorGeneral,EnterpriseandIndustry,Euro-

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peanUnion-RegionalPolicy,(2010)said“Businessincubatorshavealonghistoryinsupportingresearchanddevelopmentbasedstart -ups fromacademicandresearchinstitutes.

Overall,Western,CentralandEasternEuropehaveawiderangeofincubatormodelswithcountriesatveryvaryingstagesintheprocessofbusinessincubation(EC-CSES,2002)withatotalofaround1,200incubatorsgeneratingover40,000grossnewjobs/peryear.Thesurvivalrateisrelativelyhigh,onaverage85%,and77%ofallincubatorsarenot-forprofit.

Thereareapproximately300businessincubatorsinUKthatsupportarangeofhigh-growthtechnologybusinessesinsectorssuchasbiomedical,IT,andthecreativeindus-tries.InSweden,thereareatotalof55businessincubators(www.sisp.se).Manyincu-batorsalsooffera“virtual”incubationservicewhereadviceandsupportisprovidedtostart-upbusinesseslocatedoutsideoftheincubator.

Latin America and Caribbean

BrazilistheleadingcountryintheincubationbusinessinLatinAmericaasintermsofnumberofincubatorsinoperationandannualgrowthrate.Brazilisthefourthrankingbusinessincubationmarketintheworld.IncubatorsinBrazilhavewitnessedmeteoricgrowthfromjusttwoin1988growingtonearly400in2007(Chandra,2007).Othercountries like Mexico, Chile and Colombia followed the same.Table 4 shows thegrowthofbusinessincubatorsinBrazil.

Figure 6: Growth of Business Incubators in Brazil

Source: Chandra (2007)

Funding:BusinessincubatorsinBrazilarefundedbythecoalitionofpartners,govern-ment,federalagenciesandnon-governmentsources.TheincubatorinitiativeinBrazilwasstartedbythekeyindividualsfromtheacademia,industryandgovernment.Itis

 

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todayviewedasahybridorganization that facilitates interactionbetween the triplehelixofuniversity,industryandgovernmentspheres(Chandra,2007).

Networking:TheexistenceofNationalAssociationof incubators and scienceparksprays a key role in strengthening synergies in different kinds of incubators and byencouragingparticipationfromuniversitiesandresearch instituteswhilepersuadingdifferententitiestosupportincubators.BusinessincubatorsinBrazilprovidetheusualraftofservices,tangibleandintangiblewithanemphasisonnetworking.

The Asian and Pacific Region

The main goal of incubation systems in Asia was to promote continuous regionaland national industrial, economic growth through increasing employment, generalbusinessdevelopmentandtostimulatespecificeconomicobjectivessuchasindustrialrestructuringaswellaswealthgenerationandutilizationofnationalresources.China,Japan,India,Korea,Malaysia,IndonesiaandothermembersoftheAsiaandPacificregionembracedbusinessincubation.AsialeadsinestablishmentofBusinessincuba-tors.Thereareover1,500incubatorsinoperationinAsiaalone.Chinaalonehasover600incubatorscomparedtojustover50incubatorsinIndia(15ofwhicharetechnol-ogyBusinessincubators)and100incubatorsintheplanningstagebythegovernmentofIndia,Japan(200incubators),Taiwan(70incubators),Malaysia(20incubators),about300inSouthKoreaandAustralia(20incubators)(ChoandEunsuk,2009).

Table 8: Growth of incubators in China

1997 1998 1999 2000 2001 2002 2003 2004 2005 2006

No.ofincubatorsinChina 80 77 110 131 280 436 466 489 534 548

No.oftenantcom-panies 2670 4138 5293 7693 12821 23373 31385 33048 39,491 41,434

Totalemployeesintenantcompanies 45600 68975 91600 128776 263596 414995 - - 720,000 792,590

Accumulatednumberofgraduatedcompanies 825 1316 1934 2770 3994 6927 9,565 11671 15,815 19,896

Source: Zedtwitz and Li. (2004) and Min (2007).

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Figure 7: Growth of Incubators in China

TheexperiencesandcharacteristicsofincubationindustryinChinashowsthat;muchattentionandgreatsupportfromcentralgovernment,pourstrongdrivetoincubationindustry;Incubatorhasbecomeanimportantcarriertobuildaninnovation-orient-edcountryandthecradletocultivatetechnologyenterprisesandentrepreneurs.Thetrendisthatmorecompaniesaregettingincubatedasmoreincubatorsareestablished,andthetotalnumberofemployeesincreasing(Min,2007).Chinafurtherenhancedcapacityandfastdevelopmentofnationalincubatorfacilitiestoover600incubators.

InKorea,anotherleadingsuccessfulcountryinbusinessincubationinAsia,thecon-cepthasbeenasuccessbecauseofthegoodpoliciesonsmallandmediumbusinessesbythegovernment,especiallyduringthe1990s,whentheyneededtocreatejobs,re-vitalizethelocaleconomyanddevelopnationalinnovationsystems(ChoandEunsuk,2009).95%oftheKoreanIncubatorsarelocatedonuniversitiesorresearchcentersandmostofthestart-upbusinesses,71.1%aremainlyinengineeringorsciencesfields.

Thetotalnumberofemployeesofincubators’clientsinSouthKoreawas22,538in2006andincreasedto22,982by2009from269incubatorswith4,532businesscli-entsshowingjobcreationeffects.While,thetotalsalesvolumeoftheincubators’busi-nessclientswere$2billionin2006,whichincreasedto$2.3billionin2009,showingtheresultsofstart-uppolicies.

Australia

Australiahasastockofabout100businessincubatorsinthepublichandssincetheywere instituted in the1980s.They represent a significant infrastructure andhumancapitalasset,backedbytheir localcommunities(BIIA,2008).TheachievementsofbusinessincubationinAustraliasincetheystartedtheindustryinclude:

• 103businessincubators

• 3,500graduatedbusinesses

• Aminimumofmorethan10,500fulltimeequivalent(FTE)jobshavebeencreated

 

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InNewZealand,thegrowthintenantfirmsexistssince2005/6to2009,wasfrom100to170respectively,andtheemploymentgeneratedalsoincreasedconsiderablyin2008/9reaching1000full-timeequivalent(FTE)employees.

Africa

Comparedtootherregionsoftheworld,businessincubationisinitsinfancyinAf-rica especially in the Sub-Saharan Africa and the opportunities for innovation andentrepreneurialnetworkingarenotasdevelopedasinregionswithalongerhistoryofincubation,forinstanceAmericaNorth,EasternEurope,AsiaandPacific,andLatinAmerica.

InAfrica, according to the study carriedby Irwin et al., (2009), 21 countrieswellspread from around the continent have attempted to establish business incubatorsof which many are providing business development services, sometimes describedasvirtualincubation,ratherthanprovidingphysicalspace.Thecountrieswiththeirpercentages include; Angola (3%), Botswana (2%), Djibouti (2%), Ethiopia (6%),Ghana(5%),Kenya(6%),Madagascar(2%),Mauritius(2%),Morocco(2%),Mo-zambique(3%),Namibia(2%),Nigeria(13%),Rwanda(3%),Senegal(2%),SouthAfrica (27%),Sudan (5%),Swaziland (2%),Tanzania (5%),Tunisia (2%),Zambia(2%)andUganda(6%).

The status of the managing incubators is mixed, which include the universities oracademic institutions, the government, theNon-governmentorganizations and theprivatesector.Thetargetedbusinesssectorsinclude;Technologyandmanufacturing,Agricultureandagro-processing,Sciences,andICT.TheCapeTown-basedBandwidthBarnhasbeeninoperationsince2000andistodayregardedasoneoftheleadingICTbusinessincubatorsintheworld.TheBandwidthBarnisafully-ownedsubsidiaryoftheCapeITInitiative(CITI),adevelopmentandpromotionsagencyfortheICTsec-torintheWesternCape.

AlsoaccordingtothestudydonebytheEconomicCommissionforAfrica(Kamounetal.,2009)inselected17countriesofNorthAfricaandSouthernAfrica,atotalof18incubatorsand40businessincubatorshavebeencreated.ThemajoritywaslocatedinTunisia,MoroccoandEgyptwherenetworksofincubatorshavebeencreated.

The Uganda experience

TheUgandanmanufacturingsectorisnotyettechnology-intensiveorinnovation–led.Itisdominatedbyproductionactivitiesthatarestandardizedandrequirelowtechnol-ogybyglobalstandards.However,Uganda’seconomicframeworkstronglyemphasizesonpublic-privatepartnerships.Newpoliciesonscience,technologyandinnovations,national industrialization, and theoverallnationaldevelopmentplan reflect the in-volvement of the private sector and the push for the “triple helix” of government-academia–industrycollaboration.

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InUganda,attemptshavebeenmadetosetupincubationcenterssincethepostin-dependencedays, (1960’s) toprovide support toSMEs, researchanddevelopment,innovationandlearningactivities,andnurturingstart-upbusinesses.UniversitiesandResearchinstitutionshavealsostartedtoestablishsmallbusinessincubatorsasawaytohelpspin-offsbusinessstart-upswhileprovidinglaboratoriesforstudentsandentre-preneursinwhichtoexperiencetherealworldofbusiness.

Thefollowingarethetraditionalandthenewestablishmentsthatareofferingincuba-tionservices:

(a)TheUgandaManagementTrainingandAdvisoryCenter(MTAC)

(b)UgandaGatsbyTrust(UGT)

(c)UgandaIndustrialResearchInstitute(UIRI)

(d)TheTextileDevelopmentAgency(TEXDA)

(e)ThePresidentialInitiativeonBananaIndustrialDevelopment(PIBID)

(f )MakerereUniversity:(i)FacultyofComputingandInformationTechnology:Na-tionalSoftwareIncubationCentre(NSIC);and(ii)DepartmentofFoodScienceandTechnology:TheFoodTechnologyandBusinessIncubator.

InalltheaboveUgandanincubationsystem,therearestillmainweaknessessuchas;insufficientbusinesssupportservices,inadequatephysicalandoperationalinfrastruc-ture,inadequatecapabilitiestoexploittheopportunitiesintheemergingsectorssuchasICT,biotechnologyandnewmaterials,lowlevelofprivatesectorparticipationinR&Dactivitiesandinsufficientriskcapitalfunding.

4. Conclusions and Recommendations

Thedevelopmentofbusinessincubatorinvolvesnumerousstakeholdersthathaveaninterestinthesuccessoftheinitiative.Tenantsoccupytheincubatorsonlytemporarilyduringthecriticalfirstfewyearswhenhighoverheads,lackofbusinessexperienceandresourcesarefacedinmanynewandsmallbusinesses.Humancapitaliscoreinpro-motingincubatorsasitprovidesthecapacitytocreate,innovate,andexploitnewideas.

• Inkeepingwithglobaltrends,tostrengthenthesmallbusinessenvironmentbyimple-mentingandpromotingmoreexplicitlinksbetweenbusinessincubationandabroaderportfolioofbusinessgrowthandinvestmentstrategieswillrealizemorebeneficialeffects.

• TheprincipalfactorthatcontributedtoEuropeansuccessfulimplementationofthebusinessincubationsystemshasbeenthedevelopmentofnationalinnovativecapacityandadoptionoftheregionalinnovationsystemmodelbystateswhichassumethatthemostfundamentalresourceisknowledgeandmostimportantprocessislearningandthatlearningispredominantlyaninteractivesocialprocess.Hence,theneedforBusinessincubatorstopromotetransferofknowledge,creationofsynergiesandpromotionofentrepreneurshipdevelopmentandultimatelyindustrialgrowth

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• Otherstrongfactorsthathavehelpedadvancedcountries(NorthAmerican,EuropeanandAsian)whichotherdevelopingcountriesespeciallyinAfricacanlearnfromare;thestrongtechnologicalentrepreneurshipinfrastructureandtheuniqueculturalandsocialcharacteristicsofthepeople,(i.e.entrepreneurshipandthedevelopmentalstate).Inotherwords,governmentsupportisindispensable.

• Thebusinessincubationenvironmentsshouldbeabletomeettheneedsofbothfemaleandmalebusinessownersandentrepreneurs(genderperspective).Therightchoiceofthelocationwillspeeduptheirfurtherprogress,theyshouldbeclosetoknowledge-intensiveareassurroundedbyuniversitiesandresearchinstitutesorinscienceandtechnologyindustrialparks.

• Thereisneedtostrengthenthepublic-privatepartnerships:-Partnershipscanalsohelptopromotenewformsoffinancingandimprovecapacitybuildingmeasurestherebycontributingtothesustainabilityoftheincubatees.

• Thereisneedforstrongpolicyandstrategicmakingthatwilllayverystrongfounda-tionforincubationdevelopmentindevelopingcountriesatnationalandregionallevels.Apolicyreferringtoapolicydefined,understood,articulatedandimplementedatalllevels.

Itisconcludedthatincubationsuccess,especiallyindevelopingcountriesisthepivotalwheel of industrialization and national competitiveness, which is the reason manygovernmentsshouldpayattentionwithstrongsupport.However,emphasisshouldbeputonmanagementandoperationof the incubatorsevenwithgood infrastructureandtechnicalcapabilities.

It can be further concluded that successful entrepreneurs and viable business ideascome from all sources, from universities, corporations and the grassroots. Hence,businessincubatorscancontributetostimulatingmoreentrepreneurstopursuetheirdreamsofcreatingtheirowncompany.

Notes1Seetheirwebsite:www.nbia.org2HRDistheintegrateduseoftraininganddevelopment,organizationdevelopment,and

careerdevelopmenttoimproveindividual,groupandorganizationaleffectiveness(Chien,2007).

3See:www.infodev.org.

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27. Porter,M.E.(1998),‘Clustersandtheneweconomicsofcompetition,’inHarvard Business Review,November-December1998;availableat:http://www.econ-pol.unisi.it/didattica/ecreti/Porter1998.pdf

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PART III

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Chapter 5 - DISCUSSION AND CONCLUSIONS

5.1 Brief Summary of the Papers

Paper I:IntroducesthegeneralbusinessenvironmentandthestateofmanufacturingsectorinAfricaandUgandainparticularinthebroaderperspectiveofindustrialsec-tor.GiventheimportanceofmanufacturingtothenationalGrossDomesticProductcontributions, theproblems, constraints aswell as challenges andopportunities forinvestmentsandmanufacturingsectordevelopmentwerepresented.ThebottleneckstoAfrica’s industrialization inparticular competitiveness andkeydrivers for invest-mentswerediscussed.

The recommendationswereoutlined in the conclusions including adaptingofnewapproachesandinitiativesforindustrialdevelopmentastheyhaveaccelerateddevelop-mentsinAsiaandEuropeancountries.

Paper II: Discussed a number of support institutions and support mechanisms foracceleratingandupgradingtheSMEsandinparticularsupporttonewinitiativeofinnovativeclusterbaseddevelopmentapproach.AlthoughtheexistingSImaynotbefunctioningtotherequiredlevelsduetovariousreasonsincludinglimitedcoordina-tion,thepolicyandregulatoryframeworkhoweverhasbeenimproving.

Thefocusonthetriple-helixandclusteringconceptwashighlyrecommendedsinceitstrengthenscollaborationandnetworking;trainingandinnovation;andcompetitive-nessandproductivityimprovement.

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Paper III:Thefocuswasondevelopingandestablishingrelevantscience,technologyand innovation indicators for Uganda. The paper addressed the core indicators ofresearchanddevelopment, and innovation.Therewasanunderstandingof innova-tion,innovationactivities,RandDactivities,inputsandoutputs.TheOsloManual(OECD, 2005) distinguishes four types of innovations: product innovations (newgoodsorservicesorsignificant improvements inexistingones),process innovations(changesinproductionordeliverymethods),organizationalinnovations(changesinbusinesspractices,inworkplaceorganizationsorinthefirm’sexternalrelations)andmarketinginnovations(changesinproductdesign,packaging,placement,promotionorpricing).Aninnovativefirmcanbedefinedasonethathassuccessfullyintroducedoneofthesetypesofinnovationsintheperiodunderconsideration,butitcouldalsobeenlargedtofirmsthathavenotyetintroducedtheinnovation,buthaveunsuccess-fullytriedorarestillintheprocessofimplementingtheinnovation.Productinnova-tionshavemoreoverbeendistinguishedbytheirdegreeofnovelty(newtothefirm,region-first,country-first,orworld-first).Asanalternative,beinginnovativecouldbemeasuredontheinputsidebythefactofhavingpursuedinnovationactivities,suchasR&D,acquisitionofexternalknowledge,trainingfornewproductsandprocessesandtheirmarketintroduction.

Thepaperconfirmedtheimportanceofimportantvariableslikesize,market,technol-ogy,humanskillresources,collaborationsandgovernmentsupport.Itintroducedtheimportanceofopeninnovationandbusinessincubatorsinrespecttoenterprisedevel-opment,technologytransferandinnovations.

Thepaperhighlightedthefactorsthatdueattentionshouldbegiventoachievetechno-logicalinnovation.ItfurthergivesthepercentagesofthegrossdomesticexpendituresonResearchandDevelopment;thenumbersofinnovativeenterprisesbyemploymentsizes.

ItconcludesbystressingthatcreationofawarenessonthekeyconceptsofSTIinthecountry, prioritizing STI policies and strategies will create more opportunities andbuildcapabilitiesfortechnologicalinnovation.Tofosterinnovationandpromoteen-trepreneurship development adopting business incubators for open innovation willyieldmorepotentialbenefits.

Paper IV:ThebusinessincubatorindustryisapowerfultoolforthecreationofSMEs,forsupportingtheminstart-upandforincreasingtheirgrowthrate.Thepaperpro-videdthestateofbusinessincubationindifferentcountries,howtheyhavegrownandthelessonsforUganda.Improvingandpromotingentrepreneurship,newenterprisesand indeed theoperatingpotential forSMEs ingeneral is essential for allnationaleconomies.

Itintroducesthebusinessincubationsystemandhowinordertoboostentrepreneur-ship,promotevalueadditionandinnovation,fosterskillsdevelopmentandcompeti-tivenessalllargelycoincidewiththenationalaspirationsofamodern,middle-incomeandindustrializedcountry.TheconclusionsmadewillassisttheauthorintheanalysisanddecidingonthecorrectandmostsuitablemodelforUganda.

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5.2 Concluding Discussions

Thisthesishasdiscussedawiderangeofissuesthatarerelatedtothedesiredstruc-tural transformation of the Ugandan economy towards industrialization process.The strengths, challenges andopportunitieswerepresented indifferentpapers.To-day,industrializationisnotdrivenbyresourceendowmentsalone,butbytechnology,knowledge,skills,information,innovation,researchanddevelopment,andnetwork-ing(UNIDO,2005).Importantinthisprocessarefunctioning,efficient,responsiveand interactiveSupport institutionswhichhelpfirms todevelopandupgrade localcapabilities,andsupportthemintheirefforttolink,leverageandlearnfromforeignoradvancedsourcesofinformation,knowledge,technologyandskills.

Government’s Long Term Strategy

Ugandastillanagriculturalbasedeconomywithsubstantialnaturalresourcesandarelativelyeconomicgrowthratewouldliketotransformitseconomyintoanindustrialandprosperousmodernsociety(NDP,2010).Ugandahastheopportunityofbeingthecentralhubofthegreat lakesregionalthoughit is landlocked.Withherrisingpopulationgrowthandrural-urbanmigrationwhichisacceleratingurbanization,for-maljobcreationhascontinuedtolagbehindexpectationsinspiteofstrongeconomicgrowthandarelativedegreeofpovertyreduction.Theobjectiveofsmallenterprisesgrowthandpovertyreductionstrategiesimplieseffortstofocusonyouth,especiallyuniversityandothertertiaryinstitutions’graduates,rural-urbanmigrants,andtheur-banpoortoearnmoreincomeandparticipateinaprivatesector-ledeconomy.

Thegovernmentpolicyhastriedtotargetsuchspecificgroupsofpeopleorpotentialentrepreneurswhoarepoor,unemployedorwithoutopportunitiesandmajoritywith-outhighereducation.Asaresultthesegroupsareleastlikelytocreatesuccessfulbusi-nesses andexpandemployment.Therefore, regardlessofpolicypriorities, improvededucationaccess, technical trainingandentrepreneurship educationare crucial andgovernmentinterventionisveryimportant

Importantly tonote, therehasbeenan improvement inthepolicy frameworksandthedrivetowardsentrepreneurshipandprivatesectordevelopment.Thegovernmentisnowpromotinguniversitiesinfosteringentrepreneurialactivitiestowardsdevelop-mentofentrepreneurship.Withanumberofcapacitybuildingsupportprogramsandinitiativesinthecountry,manypeopleandhouseholdsarediversifyingtheirincome-generatingactivitiesintonon-farmactivities,thoughoftenonlyonasmall-scalebase,withafocusonlocalmarketsandemployingveryfewpeopleperbusiness.Thehouse-holddiversificationintonon-farmactivitiesi.e.informalbusinesses,tradeandmanu-facturingmainlyfabricationsandagro-processingisprobablyhelpinginraisingtheirhouseholdincomes(Bakeine,2009).

However,thishasbroughtmanynewcomersintheservicesandindustrialsectorasentrepreneursoremployeeswithlittleornotrainingintheircurrenteconomicoccu-

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pation.Duringthesurveys(STIandISCPassessmentsurveys)itwasrevealedamongSMEsthatquitelowlevelsofbusiness,managerialandtechnologicalskillshavehadadverseeffectsontheirenterpriseupgradingandgrowth.Yet,ithasbeenrecognizedthatthecompetitivenessofsmallcompaniesisincreasinglyperceivedintermsoftheirinternalcapabilitiestochoose,use,adaptanddeveloptechnology.

Furthermore, on ground even the more qualified graduates and entrepreneurs finditdifficult(ornotattractive)toenterindustrialorotherprocessingactivitiesthatarerelated to relatively high levels of technology investment, networking, institutionalsupport,orskillsformation;theyratherseemtooperateinsectorswithlowerrequire-ments,suchasthelocalservicesector(finance/microfinance,transport,consultancyandtrading).Theseaspectslimitthepositiveimpactofentrepreneurialdynamicsinthecountryoninnovation,industry,jobandgrowthcreationaswellasoveralleco-nomic diversification and development. The involvement of academia in industrybusinessrelationshipscancontributegreatly,especiallyintermsoftechnologytransfer.Oneofthesuitablewaysisformationofbusinessincubatorslinkedtouniversities.

Science, Technology and Innovation Indicators

The STI Indicator approach is useful for identifying the linkages and outcomes ofSTIactivitieswhichcanthenbeusedanalyticallytoshedlightontheimpacts.ThefirstresultsfortheSTIindicatorsinUgandawereratheronthelowersidebeingthefirst time to conduct STI survey (2009/10). There was low proportion of businessenterpriseexpenditureonR&DwithfewresearchersingrossexpenditureonR&D.Fromotherstatistics,wecandeducethatthereislittlelinkagebetweenindustryandotherpublicresearchsectorsi.e.governmentagenciesandhigherinstitutions.Thereiscoordinationfailurebetweenandwithininstitutions,andhence,absenceofeffectivelinkagesbetweenvarious elementsof science, technologyand innovation system inUganda.Thereforelinkingknowledgeandproductiveactivitiesmustpredominantlyinvolvethegovernment,academiaandindustry.

Furthermore,thecapabilitytogenerateinnovationintheproductionofgoodsandser-vicesisverylimitednotonlyinsmallandmicro-enterprises,butalsoinmediumsizedones.Thescarceresourcesingovernmentandprivatesectorarespreadtoothinovertoomanyactivitiestofacilitateemergencyofsectoralinnovations.ItwasalsoobservedthatthereisinsufficientspecializationanddifferentiationinthefunctionsamongtheorganizationsthatperformR&Dandotherinnovation–supportingactivities.Whenattention is focusedonspecializationandcoordination,financial support, technicalandnon-technicalassistance,humanresourcecapacity,addressingmarketlinkagesandstrengthenpartnerships,therewillbeadifferenceinthefutureSTIindicatortrends.

Withrespecttoinnovativeenterprises,fromthefindings,therearemanyinnovativefirmsinthecategoryofsmallfirmsthatemploylessthan10employees,fewerinme-diumsizedandagainmoreinthelargecategory.Thisisexpectedsinceforsmallfirmsandespeciallystartups,mostproductsandprocesseswillbenewtothemandprobably

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totheirmarkets.Thisclearlyindicatestheneedtosupportincubatorprojects(incuba-torsthatsuitandadapttolocalconditionsandopportunism).Thiscanbeexplainedfromthesignificanceofbusinessincubatorsfromtheliteratureas;(a)mechanismsfortechnology transfer and innovations, (b) self-sufficiency and survival, (c) economicandindustrialdevelopment.Inparticular,fromtheabovediscussion,therearethreekeycomponentsthatneedspecialattention,thesizeoftheenterprise,theconditionsorenvironmentandthelinkages.ThesearealsoreferredtointheOslomanual,2005as“Actors,theframeworkconditionsandtransferfactors/linkagesandnetworks”.

ThisthesisstressestheregulardevelopmentofSTIindicators,especiallyindicatorsofimpactsandstronglycallsforaframeworktoguidestatisticalworkandprovidebetterunderstandingofhowdifferentindicatorsareconnected.Governmentsshouldadoptamixofpoliciestoremoveorreduceobstaclesthathamperscience,technologyandinnovation:Forinstance,easingaccesstofinance,makingmoreskilledlaboravailable,orfacilitatingmorecollaborationtocooperatewithotherfirms,technologicalinstitu-tionsandgovernment.Furtheractionisnecessarysuchastheimprovementofindica-torsmeasuringknowledgeflows,qualityofSTIstatisticsandlinkages.

Collaboration and Partnerships

Collaborations and Partnerships can significantly facilitate the transfer of scientificknowledge in the development of tangible products and processes. Over the pastdecade, consensushasbeengrowing regardingpublic-privatepartnerships (PPP) inUgandaandaPPPBillisyettobeapprovedbyparliament(MFPED,2010).Fromliterature,itissuggestedthattechnologicallearning,organizationalandinstitutionalcapacitybuildingwillhelptodevelopproducersandthatlearningwillbemosteffec-tivewhenproducerscan interactwitheachotherandwithothergroups, especiallycustomers.

Thisconfirmstheargumentbytheauthorthatopen innovationbusiness incubatorpractices linked up in cluster based business approach can stimulate such achieve-mentstooccur.LaursenandSalter,2005alsoconfirmedthatfirmswhohaveopensearchstrategies—thosewhosearchwidelyanddeeply—tendtobemoreinnovative.Evidencehasshownthatcontrolledcollaborationofgovernment,academiaandindus-tryfacilitatesinnovationandcreativedevelopmentwhileprovidingbalancebetweenknowledge,socialbenefitandprofitmotivations(Leydesdorff,2005).Itisalsosaidthatthebetterthemarkets,resourcesandinformationthattheenterprisescanaccess,theeasieritwillbeforthemtoovercometheirinternalconstraints,raiseproductivityandbecomemorecompetitive.JinCho,(2009)hadthesameargumentthatincuba-tionsuccess,especiallyindevelopingcountriesisthepivotalwheelsofindustrializationandnationalcompetitiveness.

Thereisnodoubtthatmanyexistingandfuturebusinesseswillrequiretechnology,businessprocesses,humanresource,andcapabilitiestobeatorclosetoregional/in-ternational(bestpractice)level.ThisargumentissupportedbyRomijn,(2001)who

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assertsthattechnologicalcompetenceisanimportantdeterminantofsmallmanufac-turers’abilitytoholdtheirowninacontextofliberalizationandglobalization.Alsofromliterature(Chien,2007;Wang&Zang,2005)arguethatthereisneedtoconsiderseriouslyhumanresourcedevelopmentasanimportantpartoftheincubatormanage-mentanddevelopmentprocess.ThepathUgandahastakeninliberalizingeducationandothertertiaryinstitutionsisright,inthathumanresourcedevelopment(improv-ingeducationandskilllevels)isconsideredanimportantstrategyforbusinessgrowthandnationalcompetitiveness(Sunetal,2007).ThereforethereisneedtocollaborateanddevelopfacilitatorsthatwillhelptheSMEs’memberswithrelevantservicesandactivitiesthatwillhelpthemtoexecutetheirobjectiveswithmaximalprofessionalismandefficiency(thetriple-helixmodelofcollaboration).

Therefore,tacklingtheseissuescanresultinimprovementsonvariousfrontsofeco-nomicandsocialdevelopment.Theadjustmentrequirementsatthelevelofpublicandprivate support institutionsaswellascommitment toexpenditurepriorities,policyandproject implementationarealso substantial.For instance, inOECDcountries,theSMEssupportfunctionisundertakenbyorganizations/institutionswithspecial-istresourcesandskillsrelevanttothisfunction(OECD,2007).Improvementsinthedimensionsandchallengesmentionedinthissummarydiscussionarecrucial,giventhe aspirations of the country as an export-oriented,middle-income, industrializedeconomywithinthenext20years.Itwillneedstrongcollaborationandpartnershipbetweenthepublicandprivatei.e.thegovernment,academiaandtheindustry.

Theoverallanalysisofthisthesis,thefindings,viewsandrecommendationspresentedcanbe seenas a rangeofbackground inputs for this studyabout industrialization,businessincubationandentrepreneurshipandthelinkagesbetweenthem.

5.3 Scientific Contributions and Originality

ThedevelopmentofprimarySTIindicatorsinUgandawasdoneduringthisresearch,whichgavetheinitialbaselinedataandindicatorsthatcanbeupdatedregularlywhenfundsareavailable.Thisisamaincontributionfromthisresearch.

The author under this research also initiated “OneVillage One Product” PrograminUgandausingthevirtualbusinessincubatormodelthatisunderobservation.Itisprovidingademonstrationofusingbusinessincubationprocess.Althoughinnovationplaysakeyroleinourconsiderations,businessincubatorsarenotexclusivelydevotedtohigh-techandinnovativeenterprises.

Theresearchexploredhowincubatorsandstart-upshavegrownacrosstheworldwhilstatthesametimeshowingAfricalaggingbehind.TheneedforresearchforboththerestofAfricaandotherdevelopingcountrieslikeUgandacannotbeunderstated.

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5.4 Way Forward

For the subsequent stagesof this research, and tohandle the restof theobjectives,anothersurveyisinprogress.Thesurveyareaswereselectedfromtheregionalurbancentersbasedupontheemergingofmanufacturingandservicesactivities.Areaswheremarketisnotamajorproblem,butlocalSMEsandtheyoutharefacedwithmanydifficultiesandchallengessuchaspoorinfrastructure,lackofservicedworkpremises,inadequatetechnologies,accesstofinancing,businessmanagementskills,globalcom-petitionfromcheapimportedproducts,andlowaccesstoinformationandknowledgeforproductionandmarkets.FoururbanregionswereselectedinUganda,i.e.Central-KampalaandMasindi,Northern–LiraandGulu;Easternpart-JinjaandMbale;andWesternpart-MasakaandMbarara.Inaddition,italsoincludestherelevantministriesand institutions/agencies that are involved inbusinessdevelopment services.OthercountriesthathavebeenincludedinthestudyareasareSwedenandTanzania

Thequestionsarebasedonthebusinessincubationtheory;onthemajoractivitiesof-feredbybusinessincubators,theirfunctionsandmanagementprocess,factorsfortheirsuccessesorfailures,theirrateofattractingdemand,thebenefitsandtounderstandwhattheeffectsoftheseareonindustrializationprocess.Asindicatedintheliteraturereview,participationofstakeholdersisveryimportant.Therefore,thesurveywillbethroughadministeringquestionnairesandinterviewsbystructuredquestions,groupdiscussionsasparticipatorymethodtoassesstheperformanceindicatorsforbusinessincubationprocessinbusinessincubatorsandtheirdemandfromthepotentialten-ants.

Finally,themostappropriatemodelwillbedecidedupontoguidethegovernmentordecisionmakersintheroll-outofbusinessincubationschemeinordertoincreasethesuccessofimplementation.Themodelwillincludeassessmentframeworkwithindica-torswhichcanbeusedtoplan,monitorandevaluatetheirperformance.Thiswillfur-therraiseawarenessontheroleofbusinessincubatorstopolicymakers,academiciansandpractitioners.Henceitincreasesinterdisciplinarypartnershipsandcollaborations.

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