7.3 Agriculture Extension: The Case of Embrapa

BOX 7.3 Agriculture Extension: The Case of Embrapa

Embrapa, the Brazilian Agricultural Research Corporation, is a state-owned research corporation affiliated with the Brazilian Ministry of Agriculture. Embrapa generates and transfers new technologies and techniques tailored to Brazil’s climate and soil conditions. The use of these technologies by Brazilian farmers for decades has facilitated the expansion of Brazilian agriculture and increased exports at internationally competitive prices: first, by expanding the supply of arable land; and second, by improving the productivity of selected crops. New techniques to improve the quality of the otherwise inhospitable Cerrado soil in the tropical savanna opened a vast tract of newly arable land, keeping marginal agricultural costs down and enabling an increase in agricultural production, while improvements in the cultivars of soybeans and cotton ultimately yielded twice-yearly harvests. Both activities increased the productivity of land.

Why did Embrapa succeed while other research organizations have failed? Embrapa’s mission orientation, focusing from the outset on the improvement of agricultural productivity rather than the production of scientific work, has been a key driver of its success. Integration into the international flow of knowledge has increased research efficiency and accelerated training. An open intellectual property rights policy—and a network of offices spread throughout the country—has facilitated the dissemination of Embrapa’s discoveries. Funding has been kept at adequate levels for more than two decades. Investments in human capital have been highly prioritized. The organization has actively promoted a meritocratic culture. Research has dealt with the practical problems of agriculture, and farmers have quickly deployed technology and innovations sourced through Embrapa. By reacting to market signals and focusing on activities for which demand was increasing in international markets, Embrapa has avoided the usual challenges of purely “supply-push” technology transfer policies.

Sources: Cirera and Maloney 2017, based on Correa and Schmidt 2014.

TES and BAS share similar strengths, drawbacks, and risks. Among the strengths, TES provide the opportunity for creating a clear and centralized offer of services, supplying tailored services based on diagnostics, building core competencies in production and managerial operation, and addressing the skill gaps for specific technologies. On the other hand, TES also face the risks of overcrowding the market, firms’ lack of willingness to pay for upgrading, and wrongly prioritizing some services if they are not fully integrated and coordinated with the private sector.

TES interventions can be delivered to groups of SMEs, which allows SMEs to learn from and support one another in the change process. However, some individual advice and coaching should also be involved. TES also often provide “one-to-many” services such as awareness-raising events (for instance on new technological developments, business digitalization, or Industry 4.0).

TES and BAS can operate with each other and with other policies aimed at supporting SMEs. BAS are generally relevant to a broader market (which includes firms that are

not innovators). These services often take a sequential approach that reflects the need for SMEs to develop and build their absorptive capacities. A firm may first focus on improving its basic managerial skills and technologies applied to GBFs before moving into sector technology upgrading.

Most TES develop standardized assessment and benchmarking tools, and standardized approaches to common SME upgrading problems (such as business planning, production, and efficiency-lean manufacturing), but tailor the implementation and sequencing to the specific circumstances of the client. There is evidence that TES schemes (as well as BAS schemes) are often more effective when they are combined with market development initiatives such as supplier linkages programs to large firms or multinationals or new export markets, as these provide the motivation and incentives to invest in internal improvements. They can also be accompanied by financial support to companies to support implementation, usually through matching grants. Such support can address the financial risk of implementing new technologies and business models within SMEs.

3. Supporting More Sophisticated Technologies: Technology Centers

Technology centers (TCs) are a broad category of institutions that provide a range of technological services to businesses, from the provision of basic or customized technological services to more sophisticated R&D projects and technological development. TCs are often supported by government and implemented as public-private partnerships with industry or sector associations. They tend to be sector specific, often helping to develop new technological solutions or adapting existing market technologies to the needs of the private sector. TCs are an important actor in regional innovation systems, given their location and proximity to industry clusters (for more on innovation systems, see Cirera and Maloney 2017).

TCs can have very different functions in developing countries than in developed countries. In developing countries, technology centers can serve as a policy vehicle to house support measures such as provision of modern manufacturing equipment and related training, testing, product design, development, and demonstration. They might not have a strong focus on R&D. Instead, they tend to focus on the diffusion of technologies to SMEs. Typically, they offer workforce training (often for a fee) for the target group. TCs address cross-cutting issues such as design and fabrication, as well as skills gaps in new production technologies and processes. They also frequently involve BAS and TES, as well as certification services. By contrast, in developed countries, TCs tend to have less focus on mainstream workforce training and have moved up the value chain, often providing practical advice on how to innovate and adopt new technologies, brokering applied R&D and providing technology awareness. In Japan, local public technology centers not only provide small local firms with various technological services, but also conduct their own research and patent inventions (Fukugawa 2009).

TCs may be stand-alone entities or part of a larger network. One of the best-known networks globally is the Fraunhofer Society in Germany, a network of 72 applied research centers that work closely with industry and other parts of the research sector.11 An example of a network of technology centers in developing countries is the Indian Technology Centers Network, which aimed to provide access to advanced manufacturing technologies and offer young workers opportunities for technical skills development. The World Bank–funded initiative ran from 2015 to 2021. More recently, TCs worldwide have been focusing on supporting smart manufacturing and Industry 4.0 technologies.

TCs are also an attempt to address coordination failures and asymmetric information about existing technologies. While TCs target SMEs, other potential target groups include large firms and other stakeholders such as industry associations, given that the focus is usually more specific and geared toward more sophisticated technologies. Some key strengths of this instrument are the provision of targeted training and services close to industry and the creation and diffusion of technologies. Some potential drawbacks and risks include the potential of being captured or rent seeking; the challenge to remain close and relevant to industry; and the lack of proper governance structure, leadership, staff, and service mix to deliver effective services, which risk turning these centers into dysfunctional physical infrastructure.

To lay the foundation for good policy design for TCs, policy makers need to make appropriate decisions on a few crucial issues. First, the ownership of the program needs strong engagement from industry and the private sector, rather than being run as a fully government-owned scheme. Second, TCs require a sustainable business model. Typical revenue sources include fees charged for training services, testing, certification services, and use of equipment. Third, a strategic focus needs to be decided in collaboration with the private sector. Most centers have a focus on specific industry sectors or types of technology (such as subsectors of manufacturing), which need to match with the demand coming from the private sector. Finally, it is critical to define a strategic location to ensure that it is close to main industry customers.

4. Finance Instruments to Support Technology

Financial imperfections are pervasive in many developing countries and are particularly severe for technology upgrading projects, especially for smaller firms, as discussed. Many public and development banks, such as Brazil’s development bank (BNDES) and Chile’s Production Development Corporation (CORFO), provide credit lines or loan guarantees to businesses to finance the purchase of technologies. This is an extensive practice in some countries, and should be a focus for policy makers, especially when the potential externalities and spillovers are low and financial imperfections are obvious. When externalities in an innovation project such as upgrading a technology are low and public finance is costly, loans should be preferred to grants to induce innovation