26 | Agricultural Innovation in Developing East Asia
factors affecting innovation. It treats innovation as the accumulation of knowledge, labor, and physical capital. The figure highlights that farms, farmer organizations, and firms are the critical players in the system and that their decisions about accumulating capital, labor, or knowledge need to be jointly considered. Figure 3.1 broadly distinguishes the demand for factors from the supply to highlight that, without demand from farms, farmer organizations, firms, and the wider economy, supply-side policies to generate or disseminate relevant knowledge are equivalent to pushing on a string. The division between the two sets of variables is not sharp, particularly in the knowledge area, and the bi-directional arrows aim to capture the feedback relationship between farms and firms on the one hand and knowledge institutions on the other (Fuglie et al. 2020). Coordinators and knowledge brokers are shown in the middle given that they may support interaction and innovation processes among supply- and demandside actors. Appendix C describes the supply of and demand for, as well as the enabling environment for or barriers to, innovation. Given limited resources, each country needs to assess the most binding constraints to innovation. Both coordination and governance (not captured by figure 3.1) play crucial roles in guiding the innovation process and the associated investments in strategic areas, that is, priorities to address or remedy to foster innovation. Coordination may facilitate demand articulation, co-innovation among diverse actors, and alignment of other essential investments for innovation to take hold. Innovation governance refers to the systems and practices for setting priorities and agendas, designing and implementing policies, and obtaining knowledge about their impacts (World Bank 2012). The maturity of the AIS in any given country is typically aligned with the state of its agri-food system and overall economic development. Figure 3.2 provides an FIGURE 3.1
Schematic presentation of agricultural innovation system Supply Education and training system Tertiary and vocational schools Research and extension system • Public and private extension services • Quality and standards programs • Domestic and international public and private research institutes, centers of excellence, and firms • Domestic or imported inputs
Accumulation and allocation
Demand
Human capital and knowledge Physical capital and inputs
Farm, farmer organization, firm capabilities • Technical skills • Business and management skills
Coordinators/knowledge brokers
Enabling environment and barriers to accumulation and reallocation • Land rights and markets • Finance and risk management • Business regulatory climate • Information barriers • Innovation and self-discovery externalities; intellectual property rights • Infrastructure and regulations Source: Adapted from Fuglie et al. 2020. Note: FDI = foreign direct investment.
Incentives to accumulate • Competitive structure • Access to markets, trade, and international networks; FDI regulations
