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 innovationrelated 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 noncompetition 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 sectorspecific, 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.

Page 20 of 22

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