The Third Science with Africa Conference

March 12-15, 2013

Prof. Jari Kuusisto Visiting Scholar
MIT Sloan School of Management
Cambridge USA
Measuring Innovation Environment
in Africa
Contents
Introduction
Innovation based growth
The importance of innovation as a driver of development
Opportunities for Africa
Innovation and its benefits are widely spread
Evolving nature of innovation
What is innovation?
Hidden Innovation
African Innovation Index
Systemic approach
Towards validated list of indicators
Value of innovation index
2
Introduction
Our recent work on innovation research
1. African Innovation Index development 2012-13 - UN
2. User innovation indicator development for consumers 2011-13 - MIT
How significant inputs consumer make to innovation?
To What extent consumer innovations diffuse on markets?
Indicator development for on-going surveys
3. Community Innovation Survey 2012 Finland Statistics Finland
What is the scale of user-driven innovation among Finnish businesses?
4. User innovation drivers and obstacles in the public sector? (2012)
Education, healthcare and construction samples from Finland
5. 15 country service innovation policy benchmarking study (2012) - EU
12 EU countries, USA, China, Korea
6. Service Innovation survey in Nordic countries Nordic Council
7. R&D&I Policy renewal projects in 11-countries,
EU, OECD, Chinese Academy of Science
3
Innovation-based growth
Innovation is seen as the central economic growth driver and a
key to improved standards of living
There is on-going intensive race for global innovation
advantage and launch of

1. policies aimed at helping businesses to become more
productive and innovative, and
2. facilitation the creation of new companies that produce
high-value-added products and services
E.g. by boosting their use of information and communications
technologies
4
Africa can improve
Average normalised scores Global Innovation Index, Insead 2012
Or, is measuring missing some African innovation?
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In Eastern and Northern Africa,
the rankings are led by Mauritius
(49th), followed by Kenya (96th),
Rwanda (102nd), Zambia (107th),
Mozambique (110th), Zimbabwe
(115th), Uganda (117th), Malawi
(120th), Madagascar (126th), the
United Republic of Tanzania
(128th), Ethiopia (131st), Burundi
(137th), and Sudan (141st).
Mauritius is ranked 49th (47th
among GII 2011 countries), up from
53rd in 2011. With a net jump of
six positions compared with 2011,
Mauritius was affected in the rank-
ings by the adjustments made to the
GII model (Annex 2). This archi-
pelago of 1.3 million inhabitants,
with the 3rd highest GDP per cap-
ita in the region after Botswana
and Gabon, gets its strengths from
the Output Sub-Index (48th),
Institutions (24th), and Creative
outputs (31st), where it ranks 1st in
the region. It has relative def icien-
cies in Human capital and research
(70th), Infrastructure (112th), and
Knowledge and technology outputs
(78th). Particularly worrisome is its
101st position in elementary educa-
tion; if Mauritius does not priori-
tize investing in education (it ranks
101st with a current expenditure on
education of only 3.1% of GNI), the
improvements made in tertiary edu-
cation and other areas such as link-
ages might be short-lived.
In Middle and Western Africa,
Ghana leads at the 92nd position,
followed by Senegal (97th), Gabon
(106th), Mali (119th), Cameroon
(121st), Burkina Faso (122nd),
Nigeria (123rd), Benin (125th),
Gambia (130th), Cte dIvoire
(134th), Angola (135th), Togo
(136th), and Niger (140th). With the
2nd GDP per capita in the region (at
PPP$ 16,021), the ranking of Gabon
is disappointing.
Ghana epitomises the impact on
a ranking of adjustments to the gen-
eral framework, breaks in series, and
availability of data previously miss-
ing (Annex 2). This year, Ghana is
ranked 92nd (87th among GII 2011
countries), down from 70th place in
2011. This country of 24.3 million
people shows a balanced prof ile,
with rankings ranging from 73rd on
Market sophistication to 107th on
Infrastructure. This year a new indi-
cator on the cost of redundancy dis-
missal was introduced in which it
ranks 134th, implying 69 positions
lost in the regulatory environment
sub-pillar (54 positions lost among
GII 2011 economies). Changes in
sub-pillar 1.3, business environ-
ment, also affected Ghanathe
country dropped 17 positions in the
rankings on this sub-pillar (15 if
only 2011 economies are consid-
ered). In addition, the availability of
new data related to expenditure on
R&D revealed some weaknesses and
strengths previously not assessed for
lack of data: low levels of researchers
and GERD led to a 97th place in the
0
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200
300
400
500
European
Union
Sub-Saharan
Africa
Central and
Southern Asia
Latin America
and the Caribbean
Northern and
Western Asia
South East Asia
and Oceania
Europe Northern
America
Figure 5: Average scores for selected country groups
Note: Countries/economies are classified according to the United Nations Classification (20 September 2011). European Union overlaps (it includes 26 European countries, and Cyprus in Western Asia).
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Institutions
Human capital and research
Infrastructure
Market sophistication
Business sophistication
Knowledge and technology
outputs
Creative outputs
5
Opportunities for Africa
African innovation space is fairly open for novelties
Lighter regulatory environment can be an advantage
E.g. mobile money faces less regulatory barriers and
Less resistance from established financing industry than in developed
countries
Software based innovation tools are increasingly
inexpensive and widely available across the Africa
Need for innovation is clear
Improvements in public services are welcome
Old industries need to be renewed e.g. agriculture, distilleries
More new technology based industries

6
Evolving nature of innovation
As innovation activities keep evolving
Innovation policy needs to develop as well
Why new type of innovation policy?
Benefits of Innovation are widely spread
Today much of the innovation happens outside of the laboratories
Benefiting large number of citizens
Who have a chance to become active innovators and
Changing their lives better
Key changes
In addition to technology, innovation in services, organizations
and in the public sector can benefit citizens
Open and user innovation, data innovation can be pursued by
large and small businesses, user groups, communities and
citizens
8
What is innovation?
Definitions have expanded over time from a narrow focus on
technological innovation to a much wider range of activities
The implementation of a new or significantly improved product
(that is, a physical good or service), process, a new marketing
method, or a new organizational method in business practices,
workplace organization, or external relations (OECD, 2010)

9
Innovation in the 21
st
Century Economy
Innovation includes
the design,
invention,
development and/or
implementation
For the purpose of creating new value for
customers and financial returns for the firm *
the design, invention, development and/or implementation of new or altered products, services,
processes, systems, organizational structures, or business models for the purpose of creating new
value for customers and financial returns for the firm*
*A recent definition proposed by the US Advisory Committee on Measuring Innovation in the
Twenty-First Century Economy
new or altered products,
services,
processes,
systems,
organizational structures,
business models
of
10
Innovation in the 21
st
Century Economy
I nt roduct i on | Chapt er 1
The Gl obal I nnovat i on Pol i cy I ndex | 13
markelplace usage. ligure !-! charls lhe dimensions
of potential innovation opportunity in the innovation
value chain.
To be most effective, countries innovation activity
should be found along all matrices of the innovation value
chainin all types of innovation and along all phases of
development. But one of the biggest mistakes countries
make with their innovation strategies is that they dene
innovation too narrowly. In reality, many countries (and
companies) focus their innovation activity only on products
and, even then, only on a sub-set of products tradable
on inlernalional markels. And, as ligure !-2 depicls,
many countries only focus on obtaining the intellectual
property for an innovative product and then developing,
manufacturing, and exporting it.
Indeed, building their economies around high-
productivity, high-value-added, export-based sectors,
such as high-tech or capital-intensive manufacturing
sectors, appears to be the path that nations such as China,
Indonesia, Malaysia, Russia, and others are following,
in the footsteps of Japan and the Asian tigersChinese
Taipei, Hong Kong, Korea, and Singaporebefore them.
These countries place the vast majority of their innovation
focus on supporting the manufacturing and export of
internationally tradable products, while generally giving
short shrift to their domestic services industries. This is
unfortunate for countries, because export-led growth
strategies leave broad swaths of opportunity to innovate
in services, business models, and organizational models
untapped, despite the fact that, in most nations, especially
large and mid-sized nations, the non-traded sector is
substantially larger than the traded sector.
8
Why Is Innovation Important?
In recent years, a growing number of economists
have come to see that it is not so much accumulation of
capital but rather innovation that drives countries long-
run economic growth.
9
As the OECD notes, A driving
factor for much of the economic growth and rise in living
standards in the post-World War II era is the rapid advances
in technology and innovation.
10
The U.S. Department of
Commerce estimates that technological innovation has
been responsible for as much as 75 percent of the growth
in the American economy since World War II.
11
In a seminal
study of ninety-eight developed and developing countries,
Klenow and Podriguez-Clare lound lhal up lo 90 percenl
of per-capita income growth stems from innovation.
12

Indeed, innovation drives economic growth,
employment growth, and wage growth by driving the
productivity growth that lies at the heart of it all. As
the OECD found in a denitive review of studies on
productivity and employment:
Technology both eliminates jobs and
creales jobs. Cenerally, il deslroys lower-wage,
lower-productivity jobs, while it creates jobs
that are more productive, higher-skilled, and
better paid. Historically, the income-generating
effects of new technologies have proven more
powerful than the labor-displacing effects:
Technological progress has been accompanied
not only by higher output and productivity, but
also by higher overall employment.
13

Moreover, the OECD has shown that technology-
using industries have higher-than-average productivity
and employment growth than industries that use less
technology.
14

Moreover, innovative activity delivers substantial
social returns outside of those reaped by the innovator.
Nordhaus estimates that inventors capture just 4 percent
of the total social gains from their innovations; the rest
spill over to other companies and to society as a whole.
15
And Manseld nds that the social rate of return from
Products
Services
Production processes
Organizational
models
Business models
Conception
Research &
Development
Transfer
Production/
Deployment
Usage
Phase of Development
Figure 1-1: The Innovation Value Chain
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Different types of innovations
At various stages of economic process
Hidden innovation
12
R&D&I
outside of
facilities
Innovation
without major
science/
technology
element e.g.
organisational and
business model
innovations
Novel
combinations of
existing
technologies e.g.
internet banking
Locally
developed
small scale
innovations
Classical
R&D that appears
in statistics
Some examples of hidden innovation
African Innovation Index

Ideally, makes use of the latest knowledge on
innovation activities
Captures the African innovation
African case
A case for African Innovation Index clearly exists
Index brings more attention towards new types of
innovation activities that are evolving constantly
Measuring of these novel activities is a challenge
Ideally Index provides tools that can assist policy makers
Offers advice on how to make most of the existing innovation
potential in African countries
Gives an idea how to develop innovation capacity in different
African countries
14
Systemic development approach
Review of indexes and indicators
Identification of a broad range of
innovation indicators
R&D and non R&D based indicators
Discussion and validation in African
context

AFRICAN INNOVATION INDEX
Implications & value of the
Index to
National policies
International policies
15
16

1.Educa)on
2.InvestmentsinR&D&Iac)vi)es

3.Infrastructure,e.g.ICT,energy,roads
4.Innova)onpolicyenvironment

5.Businessstockwithinnova)onandgrowthpoten)al
6.Foreigndirectinvestments
AfricanInnova,onIndexIndicatorclusters
17
1. Iden)ca)onofpoten)alindicators
2. Availabilityofindicatordataacrossthecountries
3. Evalua)onofpoten)alexis)ngindexes
4. Expertreviewofindicatorsandindexstructure
5. Decisiononindexstructureandindicators
6. Liaisonwithstakeholders
Sta,s,calindicatorsselec,on
18

1.Contributestothesocio-economicdevelopmentandwell-being
acrosstheAfricancon)nent
2.Assistsevidencebasedinnova)onpolicydevelopment
3.Enablescompara)veprolingofinnova)onenvironments
acrosstheAfricancon)nent
4.Raisesinnova)onpolicyproleofinAfrica
5.Mo)vatespoli)ciansforinnova)onpolicydevelopment
6.S)mulatesinnova)onpolicydebateonna)onalandAfrican
con)nentcontext
7.HighlightsAfricaninnova)onpoten)al

Poten,alvalueoftheAfricanInnova,onIndex
19
Higher education and training Index
The Encyclopedia of Nations, http://www.nationsencyclopedia.com/
Thank You for Your Attention!
Kuusisto@mit.edu