value innovation & the ethiopian economy

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Value Innovation and the Ethiopian Economy: Scanning the Policy Environment

Presented at the 12th Globelics International Conference

Yitbarek Takele (Phd)

Department of Management

College of Business & Economics

Addis Ababa University

Fenta Mandefro (Phd)

Department of Public Administration & Development Management

College of Business & Economics

Addis Ababa University

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Abstract

Given the ever-growing threats of global climate change, non-renewable nature of most

natural resources, growing inequality, high population pressure & unemployment and lower

global competitiveness score, developing countries need to design a robust innovation policy

that can lessen the evils and ensure sustainable development. Thus, innovation has become the

way forward for an economy to prosper and ensure sustainable development. In this paper,

qualitative research approach & evaluative design with hermeneutics and narration as methods

of analyses and the non-linear theory of innovation as theoretical lens had been used.

Accordingly, the strengths and limitations of the Ethiopian National Science, Technology and

Innovation Policy have been identified and adequately addressed and the way forward has been

suggested. It is argued that while technological innovation is a necessary condition for

innovation to take place, it is not sufficient by its own: the marketing aspect being equally

important. Moreover, it is concluded that a robust innovation policy shall imbibe the concept of

value innovation than innovation per se though innovation itself is misconceived.

Key words: Value Innovation, Ethiopian Economy, Policy Environment

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Value Innovation and the Ethiopian Economy: Scanning the Policy Environment

I. Introduction

Innovation is mostly attributed as one of the main variables explaining the ever-growing

disparity in the global economic prosperity between the developed and the developing world.

The developed world uses innovation as its source of building core competence which in turn

ensures sustainable development. This can be better explained by pointing the developed

worlds use of innovation to add value to the consumer and reduce cost to the producer,

introduce unique tastes, protect imitation and ensure leverage across systems ranging from

military to business which is finally reflected through improved productivity and thereby

global competitiveness and astonishing welfare (Kim and Mauborgne, 2005; Coulter, 1998).

This has been well captured by Trajtenberg (2005: pp. 6-7) in which he succinctly quoted a

vast array of empirical research covering over half a century that conclusively showed at least

half of the growth in per capita income in virtually every country studied to be associated with

the growth of Total Factor Productivity (TFP) which is strongly associated with innovation

rather than to other, more traditional factors.

Given above, it should not take one by surprise if scholars single out innovation as the main

factor attributable to the differing long-term economic performance among countries of the

globe. Of course, countries that are able to create, maintain and sustain an enabling innovative

environment are able to reap both the short-term outcomes (such as job creation, growth,

inclusion and greater equity, etc) and long-term impacts (such as improved wellbeing, green

and transformed economy, cultural change, global influence and leverage, etc). For instance,

two-thirds of the differences in the growth performance of Ghana and the Republic of Korea

over four decades are attributable to technology-related improvements (World Bank, 2010). To

be more specific, in 1955, Ghana and the Republic of Korea both had a GDP per capita near

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$300. By 1990, Ghanas real GDP per capita was the same, but Koreas had increased to $7,500

(ibid). However, it is important to note that the activity of innovation is dynamic, complex,

non-linear and global and a systems approach is implicit in innovation policy (Gualt, 2012).

This very nature of innovation emphasizes involvement of multiple stakeholders (Governments,

education, health and research institutions, business, foreign institutions, etc), undertaking of

different activities (R&D, invention, diffusion of technologies and practices, design, HR

development, etc), coordinated linkages (such as contracts, collaborations, co-publication,

grants, monitoring, etc), multiple short term outcomes (such as jobs, growth, inclusion, greater

equity, etc), wider longer term impacts (wellbeing, culture change, global influence and

leverage, etc) (ibid). From the above analysis one can imagine the potential challenge that

developing countries could face in the pursuit of crafting and developing innovation policies.

To this end, the conduciveness of the legal and institutional environment to stimulating

innovative activity such as existence and smooth operation of company law, bankruptcy law,

regulatory and financial supervision, and competition policy, taxation policy (such as existence

of tax incentives for innovation, and protection of intellectual property rights) will be critically

important though most developing countries mostly lack such an integrated and efficient

regulatory systems.

To lessen the ever growing threats of global climate change, non-renewable nature of most

natural resource that many developing countries currently count on, growing inequality,

growing population & high unemployment, low global competitiveness, developing countries

have to design an enabling innovation policy that can reduce these evils and ensure sustainable

development (World Bank, 2010). In so doing, the main levers which innovation policies for

sustainable development should focus on four pillars: skills formation, provision of incentives,

access to information, and availability of finance (Trajtenberg, 2005). Besides, the policy shall

include innovations of all stripes including product innovation, process innovation and the

blend of both. While innovation of products can mainly help create jobs and grow the

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economy, process innovation can be mainly used to minimize waste, create value and

accordingly enhance global competitiveness and ensure environmental friendly production

system and thereby maintain sustainable development that imbibes equity, green economy,

long-term prosperity and thereby peaceful coexistence among citizens of the globe.

In this paper, while section II addresses the role of government in promoting innovation,

section III analyses the misconceptions of innovation & innovation policy. Section IV articulates

the need for innovation & innovation policy and section V evaluates the National Science,

Technology and Innovation Policy of Ethiopia. The paper closes with section VI by providing

conclusive remarks and policy implications.

II. Research Approach & Design

This is a qualitative research with evaluative design and mainly uses Hermeneutics and

Narration as methods of analyses. The non-linear theory of innovation is used as the main lens

of analysis. More specifically, the methodological basis of this evaluation is the conceptual

framework adapted from World Bank (2010), Chandra et al (2008) and Trajtenberg (2005)

that outline the policy principles and thinking frameworks about innovation policies that can

promote sustainable development in developing countries.

III. The Role of Government in Promoting Value Innovation

According to World Bank (2010), the role of government in fostering innovation could target

four generic functions: supporting innovators through appropriate incentives and other

mechanisms, removing obstacles to innovative initiatives by enacting enabling regulatory and

legal frameworks, establish government sponsored Research & Development structures and

building a creative and receptive population through appropriate educational systems. These

roles can be best played if the government designs a robust innovation policy which that

advocates a systems approach and same time contingent enough to consider the situation

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prevailing in the country it is leading. For example, developed countries often provide the

business sector with fiscal incentives such as tax rebates to stimulate R&D and innovation-

related efforts. Such incentives, which work best for medium and large-scale industry, are

generally not adapted to the situation of low- and medium-income countries, which lack

sufficient accounting capabilities and have a large informal sector of small firms with no R&D

expenses. Besides, a systems approach is required to removing obstacles to innovative initiatives

by mobilizing many areas of governmenttaxes, customs, procurement, and standards, for

exampleand requires vigilant action. The World Bank investment climate assessments and

Doing Business surveys can help identify such obstacles (World Bank, 2010). Moreover,

governments of developing countries should establish government sponsored Research as

public and university laboratories are often cut off from local needs and poorly funded and

staffed. Establishing a responsive research infrastructure depends principally on creating

adequate competencies and laboratories with adequate funding mechanisms (ibid). This is what

is critically lacking in most developing countries including Ethiopia and thus the government

need to devise an innovation policy that can fairly alleviate this very problem. Finally, as a

matter of the long-term initiative promoted by the World Bank, building a creative and

receptive population through appropriate educational systems can play paramount importance

while using innovation as the main instrument for promoting and ensuring sustainable

development. Most importantly this could involve investing in primary & secondary schooling

that consequently facilitate lifelong learning which may include customized learning, learning

by doing, and team working.

IV. Innovation & Innovation policy: The Misconceptions

An innovation is the implementation of a new or significantly improved product (good or

service), or process, a new marketing method, or a new organizational method in business

practices, workplace organization or external relations (OECD/Eurostat, 2005 quoted in Gualt,

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2012). Innovation means technologies or practices that are new to a given society that are not

necessarily new in absolute terms (World Bank, 2010). From the above definitions it can be

inferred that innovation is more than invention that also includes, adoption, adaptation and

adeption. Moreover, it can be noted that innovation is multifaceted in that it is process based,

product based and product-process based in its approach. More importantly, the definitions

aptly underscored the need for conceptualizing innovation as a process of solving problems

than the invention of something that lack marketability. Thus, a full concept of innovation

emphasizes the use of both science and technology and the application of dynamic business

models to solve human problems than misconceptualizng innovation to mean only progress in

science and technology while deemphasizing the other most important component which casts

doubt on the construct validity of the construct innovation. Therefore, this paper accentuates

the need to see the big picture of innovation as a mechanism to provide solution to human

problems than mere technical inventions which is mainly liked to science and technology

alone.

To better illuminate the misconceived concept of innovation, it will be much more effective to

apply the construct value innovation which Kim and Mauborgne (2005) explicated from the

concept of innovation as it is widely assumed to be needed to add value to the customer that

may not result a win-win and long lasting relationship between the customer and the

producers alike. Thus, if a win-win and mutually benefiting relationship is to exist, we need a

construct that reflects same, i.e., value innovation, like the one expounded by Kim and

Mauborgne. Value innovation, thus, is a construct, that underlines the necessity to add value

both to the customer and the producer alike promoting overall economic prosperity (Kim and

Mauborgne, 2005; Coulter, 1998). To the customer, value could be added through innovation

in the form of low cost and differentiated products while value can be innovatively added to the

producer by creating and applying innovative methods that can reduce cost, bring inimitable

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business models and help the leveraging of distinctive capabilities across businesses and

systems.

V. Conceptualizing Value Innovation

As value innovation is a dynamic, complex and multi-dimensional concept, it is not simple to

comprehend. Also, given its non-linear nature there are many paths to pursue same and

integration is its nucleus. In view of this, value innovation could be achieved across industry,

across strategic groups, across the chain of buyers, across complementary offerings, across

functional or emotional appeal, and across time/trends (Kim and Mauborgne, 1999b).

According to Kim and Mauborgne (1999a), value innovation is different to technological

innovation and its focus is not on technological aspects, but rather on the reconceptualisation

of the industry/business model (or breaking the rules of the game) in order to create

fundamentally new and superior customer value, where successful value innovation are

embedded in a companys entire network of relationship, i.e. companys suppliers and other

network partners (Matthyssens, 2006 cited in Setijono, n.d). Moreover, value innovation is

neither about striving to outperform competition nor about segmenting markets and

accommodating customers individual needs and differences (Kim and Mauborgne, 1999a)

implying that it is neither a pursuit of cost reduction nor differentiation in the context of

existing market rather it is pursuit of seeking serving uncontested markets in a non-

competition context that make competition irrelevant and create new markets. Accordingly,

value innovation accentuates delighting the existing customers and attracting new ones by

finding the shared values (Kim and Mouborgne, 1997, 1999b) and defeating the notion of

stuck in the middle propounded by Michael Porter. The notion of stuck in the middle is the

notion of the past that bases success only on beating the competition. If you serve uncontested

markets and eliminate waste, reduce non-value adding feature and raise and create value

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adding feature, it gives space for leap frog in customer value and jump in shareholder value

through sharp cost reduction.

Therefore, the best way to conceptualize value innovation is pushing for a quantum leap in

buyer value while pushing for a sharp drop in the industrys cost structure. In so doing, cost

savings are achieved through high volume production/operation and from eliminating features

that the industry has taken for granted (but are not valued), reducing features well below the

industry standard (because they are valued little) while delivering superior value by raising

features well beyond the industry standard (because they are highly valued) and creating

features that the industry has never offered (but highly valued by customers). Thus, the

discovery of the value innovation lies on an integrated four action framework: reducing,

eliminating, raising and creating endeavors (McDermott, n.d). In achieving same, value

analysis/engineering is a useful method to eliminate (waste) and reduce (non-value adding)

features & activities, while enhancing and creating new key elements that add value.

Finally, knowledge and ideas are the input of value innovation (Kim and Mauborgne, 1999a),

thus the capability to create value innovation is related to the concepts of absorptive capacity

(i.e. the ability to recognize the value of new information, assimilate it, and apply it to

commercial ends) and dynamic capabilities (i.e. the firms processes that use resources to

match and even create change) (Matthyssens et al, 2006, cited in Setijono, n.d).

VI. Innovation & Innovation Policy: Essence and Pillars

Innovation has become the way forward for an economy to prosper and ensure sustainable

development through improved global competitiveness given the ever-increasing

interconnectedness of the world. Besides, it seems that the period of competitive advantage

fetched from resources (mainly physical) has got significantly diminished as what counts most,

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nowadays is not the basic resource but the process of transforming it into something that

customers value most. Moreover, the world is moving towards the concept of service economy

which is highly process oriented and innovation driven than resource based. For example, you

go to a restaurant not mainly to dine but to discuss business so that restaurants are not simply

place to eat and drink but to do business. Thus, restaurants has to be designed and arranged in

a way that they are suitable for same. Most importantly, countries that are low in their global

competitiveness index shall pursue the path of innovative growth if they have to catch up or at

least close the gap with others that are in advanced stages. They need the path of value

innovation to do or produce something cheaply than others or do or produce things better than

others at the same or lower cost.

To this end, innovation deserves to be the center of government policy especially in developing

economies whether they are well endowed with natural resources or otherwise. Even countries

which are well endowed with natural resources can only ensure temporary growth but not

sustainable development. This is due to the fact that for a resource to be source of competitive

advantage it should be unique, it shall add value to the consumer without further processing,

be inimitable and get easily leveraged to other uses and areas of application. Such competitive

advantage couldnt be gained by simply relying on natural resources. Of course, natural

resources where countries are well endowed may serve to be source of comparative advantage

than competitive advantage given the low level of innovation taking place in most developing

countries. This can be easily proved by the negative trade balance record of most developing

countries that mainly export non-value added (primary) goods. More importantly, it has to be

noted that most natural resources are non-renewable whose extensive use could endanger the

wellbeing of the posterity. As a solution to this, innovation could at least be part of the solution

for the efficient use of same.

In view of the above discussions, the basic argument of this paper specially with regards to the

innovation policy initiatives of the governments of developing countries (to extend support to

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Research & Development endeavors of their own respective countries) such as Ethiopia is that,

while innovation is clearly a critical factor for growth (and hence inter alia for poverty

alleviation), a well functioning market economy cannot generate by itself the optimal levels of

investment in innovation. This is so primarily because of two sources of market failures (Arrow,

1962 as quoted in Trajtenberg, 2005 pp. 7-8) necessitating the intervention of the government

to fill the gap. This has a lot to do with partial appropriability due to spillovers that through

which the social rate of return on Research & Development expenditures often exceed private

returns by as much as a factor of three (ibid). Besides, the obvious cost of information

asymmetries and lack of financial capacity which unquestionably lead to a serious funding

gap that inhibit private firms from investing enough in innovation and Research &

Development, thus depriving the economy from one of the key levers of sustained growth and

development.

VII. Innovation Policy & The Systems Approach: Integration as a Nucleus

As the activities of innovation are dynamic, complex, non-linear and global, a systems

approach shall be an implicit in a robust innovation policy which mainly includes integrated

innovation policy and integrated national policies. In relation to integrated national policy,

there shall be a concerted effort to integrate the national innovation policy using the following

themes for it to reap the desired fruit: product (differentiation) & process (cost) innovation,

need pull and technology push innovation, individual, organizational and system level

innovation, upstream and downstream innovation, flexible and customized and continuous

innovation.

At least equally important is the design of innovation policy that pursue an integrated action in

many different policy areaseducation, trade, investment, finance, and decentralization,

among othersand it is the right combination of interventions in these diverse domains that

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creates a fruitful innovation climate. This just emphasizes the need to follow a systems or whole

government approach.

VIII. National Science, Technology and Innovation Policy of Ethiopia: An Evaluation

Three major strengths and nine major limitations of the Ethiopian National Science, Technology

and Innovation Policy have been identified and adequately addressed based on a conceptual

framework adapted from World Bank (2010), Chandra et al (2008) launched by World Bank

and OECD, and Trajtenberg (2005).

Strengths

a. Governance structure: horizontal, interdepartmental and whole government centered

The major strength of the NSTI policy is its governance structure whose approach is horizontal,

interdepartmental and whole government centered. It embraces at least thirteen government

ministries including the Prime Minister of the country as its council members. Besides, it

includes top-level representatives of the concerned public sectors, representatives of the private

sector and selected renowned scientists and engineers.

b. Strong involvement of top leadership

One of the main reasons for the success of many policy initiatives is the strong backing of the

top leadership. The Ethiopian NSTI policy states the Prime Minister of the Federal Democratic

Republic of Ethiopia as the chairperson of National Science, Technology and Innovation

Council (FDRE, 2010: pp. 15). This implicates the success of the policy to draw the attention of

the countrys top leadership and win its support thereby coordination across different

spectrums of the government can easily be gained which paves the way for its successful

implementation. This could be taken as a gesture of showing absolute commitment for the full

realization of the policy.

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c. Emphasis it gives for designing appropriate financing and incentive mechanisms in a

bid to promote scientific, technological and innovative activities

The final and most important strength of the Ethiopian NSTI policy is the emphasis it gives for

designing appropriate financing and incentive mechanisms in its bid to promote scientific,

technological and innovative activities. This is very important given that the current total

research expenditure in Ethiopia is one of the lowest in the world while the existing financial

system of the country is not designed to address the needs of innovative activities in the

enterprises sector (FDRE, 2010: pp. 7). In view of this, the policy emphasizes the need to create

national technology and innovation funds , introduce fiscal incentives such as tax exemption

and duty free privileges for scientific, technological and innovative activities of Ethiopian SMEs,

create a system of special privileges and awards for outstanding innovations/achievements,

develop and implement pro-innovative government procurement policy, increase budget

allocation for adaptive & applied research at tertiary education institutions and TVET centers.

Limitations

a. Lack of emphasis on promoting novel & indigenous innovations

Emphasis on promoting novel & indigenous innovations is crucial in bringing lasting impact.

Innovation in developing countries shall simultaneously focus on adoption (acquisition), usage

(adaption), adeption (mastering) or creating new (indigenous) technologies, of course, with

different levels of emphasis. For this, developing countries need to improve their R&D resources

and technological absorptive capacity. In view of above, a developing countrys innovation

strategy should include policies and mechanisms that affect the countrys ability to draw on

global knowledge while the optimal policy shall be country- and sometimes even sector-

specific, investment in domestic R&D as well as policies that foster the development of high

tech industries that can make a difference (Chandra et al, 2008). However, a policy priority is

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therefore to improve the allocation of public resources and build supporting institutions, public

and private, to create, acquire, and disseminate new knowledge (ibid). In view of this, the

Ethiopian National Science, Technology and Innovation Policy (2010) aimed at providing the

basic framework to initiate, guide, coordinate and support the efforts of the country to acquire,

use and master technologies that deemphasize the promotion of novel country specific

innovations. This is partly against the mission and vision of this policy that aspires to see

Ethiopia undertaking coherent NSTI initiatives which reduce technological dependence of the

country and eventually lead the country to begin exporting its own technologies by the year

2025 (FDRE, 2010 pp 1-2). This can mainly be realized by promoting new indigenous

innovations than relying on the adoption, adaption and adeption of existing technologies. If the

visions and missions reflected in this policy document are to be realized then it is imperative to

emphasize the need for promoting indigenous innovations that can reduce technological

dependence of the country and subsequently enhance its global competitiveness in a very

sustainable manner. Besides, such indigenous innovations shall center on the green concept

that the government of Ethiopia is promoting most if it has to be well aligned with the overall

government policy and strategy while capitalizing on the comparative advantage the country.

This, of course, comes with a need for strong political commitment and considerable resource

deployment to serve same.

b. Misconceptualizing innovation as mere progress in science and technology

The second major limitation of the Ethiopian National Science, Technology and Innovation

(NSTI) Policy is its conceptualization of innovation to mean mere progress in science and

technology. However, it is important to note that innovation policy is broader than, and

different from, science and technology policy, with which it usually tends to be merged with

(World Bank, 2010). This is what exactly is reflected in the Ethiopian NSTI policy. The right

approach is to view innovation as a process (end-to-end) from idea generation to full

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commercialization i.e., to understand innovation as an issue of both technology and market;

problem solving than mere invention; as an outcome driven than process oriented.

Accordingly, the Ethiopian National Science, Technology and Innovation (NSTI) Policy as it is

usually the case for most developing countries embraces scientific ideology and ignored market

ideology. While technological innovation is the necessary condition for innovation to take

place, it is not sufficient, the marketing aspect is equally important. Thus, the Ethiopian NSTI

policy need to promote the idea that the Ethiopian government shall do more than building a

good science base that made it incomplete. This is well reflected by the governments 70-30

student enrollment policy that requires both public and private universities of the country to

make arrangements of admitting 70 percent of their total students in science & technology

fields while the rest 30 percent in the social science and business studies. Of course, it is

appreciable that the field of science and technology is given proper attention though it will not

help the economy much if the market ideology that complements it is not given due regard. The

central thesis of this argument is the fact that helpful technologies fail due to poor business

models that supports it. Thus, the Ethiopian government needs to create an open and

competitive business environment (promoting the market ideology) and avail enough funds for

the conduct of basic research (promoting scientific ideology) which the business community

may fail to finance.

In general, it can be fairly claimed that the Ethiopian government is prompting the outdated

first generation innovation policy than adapting the more dynamic second generation

innovation policy which according to World Bank (2010) is more complex and aim at

facilitating interactions between the various actors and institutions involved in innovation

processes: universities, research laboratories, banks for venture capital, and government

agencies in charge of various sectors. Moreover, the second generation innovation policy

requires action in many different policy areaseducation, trade, investment, finance, and

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decentralization, among othersand it is the right combination of interventions in these

diverse domains that creates a fruitful innovation climate than mere focus on the scientific

ideology alone (ibid).

c. Doesnt place the necessary accent for development of managerial and business acumen

skills

The third major limitation of NSTIs policy is the approach it follows towards skill

development. The policy states that prior attention shall be given to the creation of competent

and innovative manpower, predominantly in the fields of engineering, technology and natural

sciences and again disregards the need to develop the required managerial and business

acumen skills. This probably wrong approach takes its root from the narrow conceptualization

of innovation to mean only advance in science and technology. This partly goes well with the

first and foremost policy goal of providing universal access to literacy and basic math though

little has been stated about the rudiments of English and of computer literacy which are

essential as a gateway to ICTs and to global markets, which sooner or later need to be accessed

for innovation to succeed (Trajtenberg, 2005). However, the policy doesnt make sure that the

institutions and markets responsible for the supply of skills respond indeed to changes in

demand. Rather, the government follows 70-30 enrollment policy that limits the flexibility of

colleges and universities to proactively and responsively act to shifts in the demand for skills.

d. Information dissemination mechanisms are not adequately indicated

The other limitation of NSTIs policy is it escapes to discuss about the need to avail information

which can help understand the wider technological context such as the physical properties of

various materials, including their durability, to know the existing best practices, and specific

issues, for example, the relationship between design and manufacturing requirements and

materials used (ibid: pp. 34). This will hinder the passage of intimate knowledge of the market

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for the (improved) product as well for the innovation to have reasonable chances of

commercial (and not just technological) success.

e. None has been outlined to incentivize local spillovers and discourage global spillovers

It is very important for a developing country retain the fruits of its innovation within the

economy which this policy document didnt address. According to Trajtenberg (2005: pp. 12)

any innovation policy designed to promote Research & Development should not aim just at

increasing total R&D, but to do justice to foster local spillovers rather than external leakages,

develop absorptive capacity, and ultimately impact the productivity of a wide range of sectors

of the local economy. None has been outlined in the NSTI policy document as what shall be

done to incentivize local spillovers and minimize global spillovers so that the fruits of

innovation can be retained within the Ethiopian economy.

f. Does not place priority to the development and use of General Purpose Technologies

(GPT) over more Specific Purpose Technologies (SPT)

The Ethiopian NSTI policy failed to place priority to the development and use of General

Purpose Technologies (GPT) over more Specific Purpose Technologies (SPT). Of course,

technological change contributes to growth wherever it happens, but there are certain

technological advances that play a critical role in fostering growth in the economy as a whole

over the long haul than others. Indeed, in any era there are General Purpose Technologies

(GPT) that drive growth by spreading over the different sectors of the economy and prompting

them to innovate as well. The preeminent General Purpose Technology (GPT) of our era is

undoubtedly Information and Communication Technology (ICT), and as such it is enabling and

fostering economic growth in developed countries, as well as in many transition and

developing countries (Trajtenberg, 2005: 13). Coming to the Ethiopian NSTI policy, no

statement has been made whether the approach to be followed is developing a local ICT

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industry, joining forces with ICT multinationals, otherwise encouraging the ICT producing

sectors or a combination of some or all of them.

g. Doesnt at least implicitly indicate the focus of innovation as export or local oriented

The seventh major limitation of the NSTI policy of Ethiopia is it didnt at least implicitly indicate

the focus of innovation as export or local oriented. It is well on the record that the government

of Ethiopia couldnt meet its export targets. For its economy to continue to grow in double

digits, strengthening the export sector is inevitable. For this, the governments export strategy

shall be innovation oriented than a vehicle for addressing the current short-term foreign

currency needs of the country through the sale of mainly unprocessed agricultural goods. Thus,

lack of direction with regard to same is the missing element.

h. Weak Monitoring and Evaluation framework

The next major limitation of the Ethiopian NSTI policy is its poor Monitoring and Evaluation

framework. It is simply stated in the policy document that stakeholders and other concerned

bodies are given the mandate to examine the progress of the activities, seek for timely

corrective measures and assess the efficiency and effectiveness of the allocated resources (FDRE,

2010: pp. 18). The policy failed to state the need for maintaining a two level monitoring and

evaluation as it does in other policies. This includes the monitoring of innovation systems and

the assessment of innovation programs and policies. More specifically, nothing has been stated

as how the monitoring will exactly be conducted and the sources of data for conducting the

monitoring activity. Such a loophole will make the Monitoring and Evaluation results less

critical, undependable and above all unhelpful to promote the growth aspiration of the

government and people of Ethiopia. It would have been much more better to explicitly state the

use of benchmarking and data from international bodies such as the World Economic Forum

with its competitiveness indexes and the World Bank with its Knowledge Assessment

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Methodology as sources of data as they have regularly updated databases. This could have

made the M&E endeavor of the NSTI policy much more palatable.

i. Lack of balance between the short-term and long-term innovation objectives

Emphasis is more on job creation and growth than improved wellbeing & global

competitiveness, green and transformed economy, cultural change, global influence and

leverage, etc.

IX. Conclusion and Policy Implications

By and large, this assessment partly shares the findings of Mugabe (2011) in his evaluation of

the innovation systems of developing countries. This include: narrow definition of Research &

Development to mean science and technology, the little emphasis given on innovation aspects

such as technology prospecting, procurement and diffusion, lack of explicit innovation policies,

and weak engineering and entrepreneurship linkages.

Accordingly, in this research it is concluded that the Ethiopian National Science, Technology

and Innovation Policy follows a narrow definition of innovation to mean advance in science

and technology & ignores the market development aspect of same.

As the main strength of the policy document, it is observed that the will & commitment of top

political leadership is well reflected. Besides, while the national policies are fairly integrated

(whole-government approach is followed that facilitated establishment of efficient government

machinery that can ensure the much needed coordination), the innovation policy didnt

adequately apply systems approach. This may be connected to the focus of the government on

meeting short-term objectives such as job creation through product innovation than value

addition through process innovation which might eliminate jobs though while raising global

competitiveness.

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The policy also partially met some of the four main levers of any innovation policy: skill

formation aspect ignores the issues of business and entrepreneurial development though it has

fairly addressed the engineering and science skills, mechanisms to ensure access to information

are not put in place, provision of incentives such as intellectual property rights and financial

incentives are fairly covered and sources of funds got adequate attention though there is

nothing on the ground.

In relation to its limitations, the NSTI policy of Ethiopia is mainly short-sighted in that it

advocates short-term objectives such as job creation and growth than long-term impacts such

as improved wellbeing, green and transformed economy, cultural change, global influence and

leverage, etc. Moreover, the policy doesnt address all strips of innovation: it focuses on product

innovation but not process innovation and the blend of both. This could be connected to

meeting short-term objectives such as job creation through product innovation than value

addition through process innovation as this may eliminate jobs though it could raise global

competitiveness. Most importantly, the notion of value innovation is not captured in the policy

document.

Finally, it is recommended that the policy to re-look at the proper conceptualization of

innovation from both science and technology and business perspectives, balance short-term

and long-term objectives of innovation policy as the latter was not given fair coverage,

incentivize local spillovers and discourage global spillovers, connect innovation policy with

global competitiveness and export performance, promote general purpose technologies and

give significant emphasis for the promotion of ICT, Need to have full-fledged innovation policy

not one merged with Science & Technology, and Promote the application of Value Innovation in

innovation policy.

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value innovation & the ethiopian economy

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