Inclusive agro-industrial development and sectoral systems of innovation: insights from South Africa

Abstract

The agro-industries are widely viewed as important to inclusive industrial development due to their relatively low entry barriers and acessibility to small firms. However, the agro-industries are more technologically complex than commonly assumed. Small and young firms face challenges acquiring capabilities to compete effectively. The paper explores how differing sectoral systems of innovation (SSI) shape patterns of inclusion and exclusion in the agro-industries, and the factors shaping this. It analyses two contrasting South African agro-industrial sectors, maize processing and fresh citrus. It proposes a partial conceptualization of ‘inclusive’ SSIs (ISSIs) as sectoral configurations of actors and institutions that lower entry barriers and narrow capability gaps between small firms and dominant incumbents at the technological frontier. It argues that ISSIs rely on institutions that coordinate innovation-related activities in a manner benefitting small firms and new entrants, by aiding the broad diffusion of relevant technology and capabilities. Alongside state agencies, business associations can play an important role in this regard. It identifies the characteristics of state-business relations and inter-firm dynamics of competition and collective action as important underlying determinants of ISSIs. Thus, the paper highlights the need for attention to sector-level political economy in understanding the diverse outcomes of SSIs.