SR article

Innovation Analysis

In “Functions of innovation systems” (See 'Literature'), Hekkert describes how innovation systems are the drivers for technological change and how these systems can be analyzed using several functions. Here, he makes a difference between technological innovation systems, where the starting point is technology, and National Innovation systems, where the starting point is a geographical area. By mapping the different activities that take place within the system, in order to grasp its dynamics. Then, different interactions and their effects between these functions can be described. In the following paragraphs, we will identify and describe the functions named by Hekkert following his method.

Entrepreneurial activities

Hekkert explains in his paper ‘’Functions of innovation systems: A new approach for analysing technological change’’ that the successful development of an innovation depends on the other six functions. Entrepreneurial activities are a result of a well functioning system. The distillation of lemongrass is not an innovative idea; it has been done for decades. However, using solar power as a power source and thus an eco-friendly production process is innovative. When proven successful in the village of Valaramkunnu more distillation units can be installed to increase the production and this method of producing lemongrass oil can be implemented in more villages.

The market needs to be taken into account in this process. There has to be a balance between supply and demand; if the business in Valaramkunnu is successful, the implementation of this method can be done elsewhere, but it has to be in another district. Otherwise the balance between supply and demand of the local market will shift out of balance. Where in the past the Indian government played a significant role in the economy, the government is now encouraging free enterprises more and more. Regulation and free enterprise is all about balance. Small businesses in India have to go through tons of processes, bribe dozens of officials and handle police interventions (extractive institutions have been discussed in the institutional analysis). That itself can be seen as a failure of the free market. However that can’t be changed in a day and India is working on the process of becoming an enabling state [1].

 

Knowledge development

As Hekkert states, knowledge development encompasses ‘learning by searching’ and ‘learning by doing’. Beforehand the ‘learning by searching’ is done by reading relevant articles and doing calculations to determine the dimensions of the distillation unit and parameters. After this, the ‘learning by doing’ is done by doing experiments with the distillation unit to optimize the parameters. According to Hekkert R&D is a good indicator to map the effort put into knowledge development. The part of Research & Development funded by the private sector in India is relatively small. About 25% of the total research is funded by the private sector and the remaining 75% coming from the government. The reason for this is that most companies in India are small and medium scale enterprises, which lack the budget to invest in R&D. Besides that, the government doesn’t encourage companies to invest in R&D [2]. However our project is totally funded by the Amrita University, which is a private university, and thus invests a considerable amount in R&D.

 

Knowledge diffusion through networks

As Hekkert describes, the essential function of networks is the exchange of information. Network activity can be regarded as a precondition for ‘learning by interacting’. In our project this is done by giving workshops to the villagers about working with the prototype. It is also important to have people with a technical background working and living in the village to understand the prototype. More and more people are getting educated in India. Education in India is a fundamental right to children between the ages of 6 and 14. Also, they banned child labor to give children the chance to go to school. 93% of the children in India go to primary school [3] and 20.4 % go to higher education [4]. This number is growing fast in India.

 

 

Guidance of search

According to Hekkert this function can be analysed by looking at the targets set by the government or industries. Due to the deforestation in India, the government prohibited cutting trees and using them as an energy source. For the villagers this was catastrophic because they used firewood to distillate lemongrass. They needed another energy source to proceed with the distillation of lemongrass. The Amrita SeRVe program helped Valaramkunnu and part of this program is to help the village with income generation. These to combined resulted in our project: lemongrass distillation with an eco-friendly energy source.

 

 

Market formation

Since the shift to capitalism in 1991 India’s economy changed dramatically. The country started to lean more to free markets instead of government-regulated enterprises. This liberation process initiated in 1991 has immensely helped millions of people to rise from poverty. [5] This means that it is a beneficial time to start a new business in the sense of National Innovation Systems.

Hekkert argues that a new technology often has difficulty entering the market and competing with the existing technologies. Therefore, he proposes to “create protected space for new technologies”, using for example niche markets or favorable tax regimes.

Lemongrass oil is something that is known and used by locals for a long time. Currently, all the oil is produced using firewood as an energy source, which is since recently prohibited by the government and punished by fines. Our product is thus not only the first 100% sustainable product of its kind on the market, it benefits from the fact that it is exempt by these fines. There are several niche markets that we can make use of in the first stages of our business. The one we want to focus on is the local tourism industry, so hotels and resorts close to our village. Wayanad is very touristic and from research done by the previous group, we can conclude that these tourists are interested in supporting local villages as well as responsible, sustainable tourism. [6] Through the Wayanad Tourism Organization, which has the mission to “foster a culture of responsible and sustainable tourism” [7], we aim to gain access to this market.

We can thus conclude that in the sense of the market formation function, the conditions are rather favorable for our project.

 

 

Resource mobilization

In the article, Hekkert describes how “both financial and human capital, are necessary as a basic input to all activities within the innovation system”. This means that for our project, we would need financial aid for R&D (for the process optimization experiments), human resources as work forces, and infrastructure to provide access to the work place for the workers as well as for transportation of our product.

The Indian government has long been the provider of infrastructure. In recent years, this has started to change. More and more investments have been coming from the private sector in the form of the so-called Public-Private-Partnership (PPP) projects. Although India is investing in infrastructure and is planning to do so over the next decade, the infrastructure isn’t available for everyone. Especially in some of the more rural areas people simply don’t have the money for this and are struggling to get food. [8] Also, on a national level, India spends large amounts of money on R&D. Actually, they are 6th in the world in R&D spending. [9]

 

As of financial resources, all projects that are part of the Amrita SeRVe program are funded 100% by the Amrita University. Access to financial resources is thus not a problem In our project. Amrita University has taken the village of Vallaramkunnu under its wing and provides enough financial aid to support the project. However, resources as in human capital could still be problematic. Most men in the village are alcoholics and thus we need women to work on the project. These often also have to look after their children, so their employment will conflict with the raising of the children. Also, few people in the village are educated enough to work with the prototype. We will handle this by giving the women flexible hours (creating a shift-system) and by educating the villagers by trainings and guide manuals before letting them work with the prototype.

 

 

Creation of legitimacy/counteract resistance to change

Hekkert describes this particular function as follows: “In order to develop well, a new technology has to become part of an incumbent regime, or it even has to overthrow it. Parties with vested interests will often oppose to this force of creative destruction.” This function can be analysed by mapping the rise and growth of interest groups and their lobby actions.

A current trend in the technology sector is a rising interest in sustainable products. As mentioned before, the government places fines on the use of firewood from the local protected forests. The main interest group here is thus the government, which has a large lobbying power. The national framework conditions are not completely favorable, though: A big hurdle to overcome if India wants to develop is the extractive economic institutions. These have been discussed before. Another big issue for India is that not everybody has access to the basic needs to survive. Besides this they don’t have access to infrastructure. The elite, in contrast, profits from the fast growing economy in India. There are however a lot of plans in India to solve these big problems in India and if they succeed India has the potential to become a world leading country.

Another large interest group is thus the local tribal community in Valaramkunnu. Since the villagers have been living this way for a long time, and have been working on the fields as a source of income (though not stable), they might be reluctant to suddenly trust this new distillation unit to provide a better future. It is thus important we build up this trust slowly, and to convince them with results. Since we are still in the design optimization phase, we might not get to the point where we can fully convince them, however the building of trust is something we can already play a role in.

An advantage we have in this function, however, is the legitimacy we receive from the government: Since we are now using a sustainable energy source and not firewood, we are now allowed to produce lemon grass again, whereas it would be forbidden otherwise.

 

References

[1] http://forbesindia.com/interview/defining-debates-of-2011/free-enter-prise-vs-regulation/25502/0

[2] http://www.gktoday.in/private-sector-in-scientific-research-in-india/

[3] https://en.wikipedia.org/wiki/Education_in_India#Primary_education

[4] http://mhrd.gov.in/sites/upload_files/mhrd/files/statistics/AISHE2011-12P_1.pdf

[5] https://mises.org/library/indias-great-free-market-economist

[6] Richards M, Muller D, Komen R. (2016) Lemongrass Essential – The Road to Responsible Tourism. International Entrepreneurship & Development final report

[7] http://wayanad.org/content/about-wto

[8] http://projectvendor.com/infrastructure-sector-india-past-present-future/

[9] https://en.wikipedia.org/wiki/List_of_countries_by_research_and_development_spending#cite_note-1

 

Literature

M.P. Hekkert, R.A.A. Suurs, S.O. Negro, S. Kuhlmann, R.E.H.M. Smits, Functions of innovation systems: A new approach for analysing technological change. Technological Forecasting & Social Change 74 (2007), 413–432 http://www.transitiepraktijk.nl/files/Hekkert_et_al_2007_%20functions_of_%20innovation_systems.pdf