The Diffusion of Innovation in Low Income Countries

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Technological innovation is a key element of industrialisation and catch-up in developing countries. Since innovation is costly, risky and path-dependent, groundbreaking innovation is highly concentrated in a few rich countries and amongst a small number of firms. Foreign sources of technology account for a large part of productivity growth in most countries. If foreign technologies are easy to diffuse and adopt, a technologically backward country can catch up rapidly through the acquisition and more rapid deployment of the most advanced technologies (Eaton and Kortum, 1995; Bell and Pavitt, 1993). Therefore, the development process in low income countries can be supported by tapping existing knowledge and know-how. The transfer, adoption and adaptation of knowledge to low income countries hence constitute an important issue for economic growth and global development. However, technology diffusion and adoption is neither costless nor unconditional (Keller, 2004). It relies on substantial and well-directed technological efforts (Lall, 1992) as well as sufficient human and financial resources and absorptive capacity (Cohen and Levinthal, 1989). It requires appropriate institutions and policies to incentivise and facilitate the process in addition to strong local capabilities to identify the right technology and appropriate transfer mechanism, and to absorb and make adaptations according to local economic, social, technical and environmental conditions (Fu, et al., 2011). Much of the existing literature focuses on developed countries or developing countries in general. Our understanding of these issues and relationships in the low income countries (LICs) specifically is limited. Defining innovation as a new product or process, or new management, organisational or marketing practices (where 'new' means new to the world or new to the country or the firm) this project aims to fill in the knowledge gap by exploring determinants and transmission channels for effective innovation creation, diffusion and adoption in LICs under institutional, resource and affordability constraints. In particular, it aims to:-Understand the barriers to innovation creation and diffusion in LICs under institutional, resource and affordability constraints and the space for innovation policy;-Analyse the determinants of knowledge diffusion in LICs from leading innovators to latecomers, in particular the role of university-industry linkage and inter-firm networks; -Examine the effect of external knowledge diffusion to LICs, in particular the productivity impact of South-South trade and FDI with a special focus on Chinese trade and FDI in Africa; -Develop an SME open innovation network model to increase frugal innovation for the poorer societies in LICs. The research has wide relevance to Development Studies, Technology and Innovation Studies and Globalisation and Area Studies. It will contribute to the literature by filling current gaps in the literature on innovation and relevant industrial, trade, and science and technology policies in LICs. It will be one of the first systematic studies to understand the constraints to innovation creation and diffusion at the firm level in LICs and explore new innovation models and policies to overcome these barriers. The SMEs open innovation network framework will contribute to theory development in Development Studies and Innovation Studies. The project will also produce a bundle of rigorous empirical evidence that fills important gaps in the literature. Findings from the research will have important policy and practical implications for policy makers and practitioners in LICs. The project will also produce a novel survey dataset on innovation diffusion in LICs which will be made available for wider research. The policy reports and best practice guidebooks will be useful to policy makers, business managers and educators and students in LICs.