The Diffusion of Innovation in Low Income Countries

Lead Research Organisation: University of Oxford
Department Name: International Development

Abstract

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.

Planned Impact

I. Who will benefit from this research?
In addition to the academic community, findings of this research are of interest to a number of potential non-academic beneficiaries. These include: National policy-makers responsible for technology and industrial policy and development in LICs; International organisations concerned with industrial development, eg., DFID, UNCTAD, UNIDO, World Bank, UNDESA, ADB; NGOs and development-orientated research institutions; Business managers in LICs.
II. How will they benefit from this research?
The project will make its best efforts to address academic, policy, economic and societal impacts through activities involving Communications and Engagement, Collaboration, Exploitation and Application.
1. Communications, Engagement and Collaboration
-The project has developed partnerships with the Science and Technology Policy Research Institute (STEPRI) of the Council for Scientific and Industrial Research (CSIR), Ghana; the African Globelics Doctoral Academy, and leading scholars at the Universities of Cape Town and Tshwane; and has obtained support from policy makers such as the Ministry of Science and Technology of Ghana and UNCTAD. The proposal was co-developed through several rounds of consultation with relevant stakeholders.
-We plan to hold a seminar at an early stage of the project to have another 'reality check'.
-Findings from the research will have important policy and practical implications for LICs. The policy reports and best practice guidebooks will be useful to practitioners and educators. The network analysis is a participatory co-production process. The collaboration with scholars and research institutes in LICs will also significantly enhance our local policy and business linkages.
Exploitation and application
-The dissemination mechanisms include policy meetings and workshops with developing country policy makers & managers, and policy workshops at relevant UN meetings and networks. The PI and the researchers will feed the findings into the policy making process of the stakeholders. The project will organise two Conferences in Oxford and Africa.
-It will also organise a joint workshop with African Globelics Doctoral Academy, disseminating the findings and contribute to capacity building in the younger African generation.
-ODID/QEH and the PI have extensive experience of cooperation with the UNCTAD, UNIDO and various international development initiatives and NGOs, for instance, the Improving Institutions for Growth (IIG) program, the IGC and Oxfam. The PI has already had preliminary discussions with the Director of IIG who expressed strong interest in holding joint outreach workshops in Ethiopia because of real demand in Africa to increase innovation and productivity. The linkage with UNCTAD will strengthen the policy impact and research uptake of the project.
-The project-created survey database and research findings will contribute to an ESRC project online database and DFID Research portal. This new survey database will enable more high quality research on other important issues highlighted in the DFID/ESRC Call, eg, finance and innovation, skills for productivity growth.
-The project will engage graduate students at ODID, eg., the MSc Economics for Development and MPhil Development Studies student will use this database for their thesis research. Small travel funds will be provided to MPhil students who work on topics closely related to the project research.
-The project will also engage more researchers in the Cambridge-Oxford Engineering for Development initiative, and explore out-of-box solutions for the poorer societies.
-A project-based web-site will be developed after the launch of the project. We will publish the practical guidebooks introducing best practices.
-Public media channels will also be used to disseminate the findings of the research. The PI is already an active discussant on major media such as the BBC.
 
Description Findings

The project yielded a number of findings relating to the nature, impact, and sources (both national and international) of innovation in LICs.

The nature of innovation
•Innovation takes place everywhere; in developed countries and in LICs, in formal and informal sectors. During 2011-2013, 80% of firms surveyed in Ghana had introduced some form of innovation.
•But, not all innovation is measured using conventional indicators such as patents and research and development. It is often "under the radar". (Zanello et al., 2013).

The impact of innovation
•In LICs, innovation often takes the form of transfer, adoption and adaptation of existing technology, rather than new invention. This is one reason why patent activity and research and development (R&D) measures are often low in LICs. R&D expenditure to GDP ratios also vary considerably among country groups, from close to zero expenditure in LICs and 0.61 in lower-middle-income countries (LMICs) to 0.96 in upper-middle-income countries (UMICs) and 2.32 in higher-income countries (HICs) in 2011. The share of R&D spending from foreign sources is larger at lower per capita income levels.
•Diffusion and learning-based innovation has enabled firms in LICs to survive and grow. The DILIC survey of 500 firms in Ghana suggests that innovation raises labour productivity of firms through learning (Fu et al., 2014). However the low level of investment in technology-intensive innovations results in a slow process of structural change and industry upgrading.

The sources of innovation in LICs are often external
•Innovative export upgrading (increased product sophistication) in LICs depends on capital deepening, engagement in knowledge creation, knowledge transfer via investment in education and R&D, and foreign direct investment and imports. Cross-country analysis for 171 countries over 1992-2006 shows that the effect of a country's domestic R&D on export sophistication is insignificant for low and low-middle income countries, while the effects of imports, foreign direct investment and education are positive and significant (Zhu & Fu, 2013).
•Analysis of region-specific firm and industry data for Ghana in suggests that import of Chinese products has a significant positive impact on total factor productivity at the firm level, which in turn suggests that Ghana is learning useful lessons from its interaction with China (Fu et al., 2015).

Innovation depends on participation in value chains and the formation of national/regional (if not global) production networks
•Forming national or cross-African vertical production networks allows firms to produce more sophisticated products, whereas single firms typically don't have the capacity to do so (Fu et al., 2014).

Support systems are often inadequate or unknown to investors
•The survey in Ghana suggests that whilst firms are often innovative, and the Ghanaian government well-regarded as an innovation partner, most firms do not benefit from extension services such as loans or training. On the one hand, firms have little knowledge of the policy instruments available to them. On the other, innovation is not always recognised and/or measured by government, who therefore do not sufficiently support innovation efforts within the firms (Fu et al., 2014).
Exploitation Route The DILIC survey of the diffusion of innovation in Ghana was the first survey in LICs dedicated to the origin and diffusion of innovation within and to these countries. Such instrument should be used in other LICs to capture the heterogeneity of these countries and how innovation is materialize. Moreover a survey in two-three year time of the same Ghanaian firms covered in the DILIC survey would critically provide a more solid understanding of the innovation dynamics over time.
Sectors Construction,Digital/Communication/Information Technologies (including Software),Education,Electronics,Energy,Environment,Financial Services, and Management Consultancy,Government, Democracy and Justice,Manufacturing, including Industrial Biotechology,Pharmaceuticals and Medical Biotechnology,Other

URL http://degrp.squarespace.com/reflections/2016/2/12/diffusion-of-innovation-in-low-income-countries
 
Description The findings are informing both academics and policy makers about the form and nature of innovations in the LICs context, the origins and the effective channels for the diffusion of innovation within the country and from foreign sources to these countries, the barriers to innovation creation and diffusion, and the space for innovation policy in these economies. We disseminated the results to various academic conferences and to policy makers. We involved local policy makers in Ghana (Ministry of Science, Environment, and Innovation) and international organizations (UNIDO and UNCTAD). The Ghanaian government initiated a USD500,000 program to strengthen university-industry linkage for innovation. The program is led by our local partner. Moreover, the Ghanaian government launched a new large scale survey of innovation in 2000 firms in the country. It was carried out by our local partner based on the DILIC survey tool and the capability built up in the process of the project. The research was extended to Tanzania, Uganda and Kenya with new collaborations formed with STIPRO, WIPO, ACTS and SPRU and IDS. The PI, Prof Xiaolan Fu, was appointed by the Secretary General of the UN to the high level 10-Member Group to the Technology Facilitation Mechanism. The PI was also appointed by the SG of the UN to the Governing Council of the Technology Bank for the Least Developing Countries. She is also invited to the Leadership Council of the UN SDSN. Findings from DILIC has fed into UN policy debate and plan through these channels, for example, the role of regional value chain, the need to strengthen university-industry linkage, and policies for international technology transfer.
Sector Construction,Digital/Communication/Information Technologies (including Software),Education,Financial Services, and Management Consultancy,Government, Democracy and Justice,Manufacturing, including Industrial Biotechology,Pharmaceuticals and Medical Biotechnology
Impact Types Societal,Economic

 
Description Appointment to the UN Technology Facilitation high level advisory group
Geographic Reach Multiple continents/international 
Policy Influence Type Participation in a advisory committee
Impact The DILIC project has had a major impact on policies for innovation and development in low-income countries at global and national levels. It has changed perceptions within the development and business communities about the key role played by innovation in the development process. On a global level, the project results were presented to high-level policy makers in the UN General Assembly and influenced key policy documents on the Sustainable Development Goals. The project contributed to the definition of and implementation of SDG9: "to promote industrialization and foster innovation" and the establishment of a Technology Facilitation Mechanism. The project PI, Professor Xiaolan Fu, was also recently appointed by the UN Secretary-General to the Ten-Member Group to support the Mechanism, advising relevant policies and activities. At the national level, the Ghanaian government drew on the project's findings to introduce a new US$500,000 program to strengthen university-industry collaboration, led by DILIC's local partner.
URL https://sustainabledevelopment.un.org/topics/technology/facilitationmechanism
 
Description Speech at the United Nations General Assembly on innovation in low income countries
Geographic Reach Multiple continents/international 
Policy Influence Type Gave evidence to a government review
Impact The DILIC project has had a major impact on policies for innovation and development in low-income countries at global and national levels. It has changed perceptions within the development and business communities about the key role played by innovation in the development process. On a global level, the project results were presented to high-level policy makers in the UN General Assembly and influenced key policy documents on the Sustainable Development Goals. The project contributed to the definition of and implementation of SDG9: "to promote industrialization and foster innovation" and the establishment of a Technology Facilitation Mechanism. The project PI, Professor Xiaolan Fu, was also recently appointed by the UN Secretary-General to the Ten-Member Group to support the Mechanism, advising relevant policies and activities. At the national level, the Ghanaian government drew on the project's findings to introduce a new US$500,000 program to strengthen university-industry collaboration, led by DILIC's local partner.
URL http://www.tmd-oxford.org/content/xiaolan-fu-speaks-un-general-assembly
 
Description Innovation in Nigeria
Amount £450,000 (GBP)
Organisation Dangote Foundation 
Sector Charity/Non Profit
Country Nigeria, Federal Republic of
Start 09/2016 
End 03/2019
 
Description MNEs and development
Amount € 300,000 (EUR)
Organisation European Commission 
Sector Public
Country European Union (EU)
Start 01/2014 
End 12/2016
 
Title Innovation in low income countries - Ghana 
Description A firm level survey database of 500 firms in Ghana in the formal and informal sectors, covers both domestic and foreign invested firms. It focuses on the creation and diffusion of innovation in the economy. Questions are designed reflect the nature of innovation in Africa and focuses on the mechanisms for the diffusion of innovation to and within the Ghana. 
Type Of Material Database/Collection of data 
Provided To Others? No  
Impact The database will later be uploaded to ESRC data Archive for others to use. The questionnaire and the survey methodology has been used by further surveys in Tanzania, Uganda and possibly also Nigeria funded by European Commission, WIPO and private foundation. 
 
Description Collaboration with STIPRO of Tanzania 
Organisation Science, Technology and Innovation Policy Research Organization
PI Contribution DILIC project collaborated with STIPRO of Tanzania to carry out a survey and research of innovation in Tanzania using the survey tool developed by DILIC. DILIC contributed to the survey questionnaire, sampling framework method and trained the survey assistants. Also analysed the data and produced a report based on comparative evidence from Ghana and Tanzania.
Collaborator Contribution STIPRO provided local support to the survey and assigned their senior staff to carry out the interviews. They also commented on the questionnaire and sampling.
Impact A survey report based on the data authored by Fu and Contreras (2018). Also a monograph by Fu, Xiaolan using this data will be published by Cambridge University Press. There are other studies going on based on the analysis of this data, which will come out in future years.
Start Year 2016
 
Description Collaboration with Science and Technology Policy Research Institute (CSIR-STEPRI) - Accra (Ghana) 
Organisation Science and Technology Policy Research Institute (CSIR-STEPRI)
Country Ghana, Republic of 
Sector Academic/University 
PI Contribution Support capacity building of CSIR-STEPRI
Collaborator Contribution CSIR-STEPRI supports fieldwork and liaise with local ministers and policy makers
Impact DILIC Workshop in Ghana, DILIC Results Dissemination Conference, DILIC Training Course
Start Year 2012
 
Description Collaboration with WIPO for survey in Uganda 
Organisation World Intellectual Property Organization
Country Switzerland, Swiss Confederation 
Sector Public 
PI Contribution DILIC project contributed the survey tool
Collaborator Contribution WIPO secured funds and local support to carry out the survey
Impact The data is still under analysis. Output is forthcoming
Start Year 2016
 
Description 'Africa's Firms Revealed As Innovative but Unsupported' on SciDev.Net, 26 February 2014 
Form Of Engagement Activity A magazine, newsletter or online publication
Part Of Official Scheme? No
Geographic Reach International
Primary Audience Media (as a channel to the public)
Results and Impact 'Africa's Firms Revealed As Innovative but Unsupported' on SciDev.Net, 26 February 2014

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Year(s) Of Engagement Activity 2014
 
Description 'All together now' on Research: News, Analysis, Funding, Data, 10 March 2014 
Form Of Engagement Activity A magazine, newsletter or online publication
Part Of Official Scheme? No
Geographic Reach International
Primary Audience Media (as a channel to the public)
Results and Impact 'All together now' on Research: News, Analysis, Funding, Data, 10 March 2014

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Year(s) Of Engagement Activity 2014
 
Description 'Innovation takes Centre Stage' on Africa Business, pp.93-96, April 2014 
Form Of Engagement Activity A magazine, newsletter or online publication
Part Of Official Scheme? No
Geographic Reach International
Primary Audience Media (as a channel to the public)
Results and Impact 'Innovation takes Centre Stage' on Africa Business, pp.93-96, April 2014

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Year(s) Of Engagement Activity 2014
 
Description 'Top tips for building policy for innovation' on SciDev.Net, 6 February 2014 
Form Of Engagement Activity A magazine, newsletter or online publication
Part Of Official Scheme? No
Geographic Reach International
Primary Audience Media (as a channel to the public)
Results and Impact 'Top tips for building policy for innovation' on SciDev.Net, 6 February 2014

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Year(s) Of Engagement Activity 2014
 
Description Africa Innovation Summit 
Form Of Engagement Activity A talk or presentation
Part Of Official Scheme? No
Geographic Reach International
Primary Audience Policymakers/parliamentarians
Results and Impact Africa Innovation Summit held in Cape Verde (June 2014 - Xiaolan Fu)

Dissemination of research findings and involvement of policy makers
Year(s) Of Engagement Activity 2014
 
Description DILIC High Level Conference 
Form Of Engagement Activity A formal working group, expert panel or dialogue
Part Of Official Scheme? No
Geographic Reach International
Primary Audience Other academic audiences (collaborators, peers etc.)
Results and Impact The Diffusion of Innovation in Low-Income Countries (DILIC) end of project high-level conference was held at the Overseas Development Institute (ODI) on Monday, 2nd November. The conference brought together over 80 participants from across research institutions, universities, international organisations, and the private sector, and invited a group of world-renowned experts in the field of innovation in low-income countries to share state of the art knowledge and insights.

The event received many constructive and valuable suggestions and comments for a further stage of research.
Year(s) Of Engagement Activity 2015
 
Description DILIC Results Dissemination Conference 
Form Of Engagement Activity A formal working group, expert panel or dialogue
Part Of Official Scheme? No
Geographic Reach International
Primary Audience Policymakers/parliamentarians
Results and Impact On November 2014, the results from the DILIC survey was presented and disseminated in a conference in Accra (Ghana). The survey collected detailed information on more than 500 Ghanaian formal and informal firms. The event, co-hosted with the Science and Technology Policy Research Institute, was endorsed by the Ghanaian government and included more than hundred participants amongst policymakers, academics, and practitioners.

Dissemination of the Survey report to local policy makers and academia
Year(s) Of Engagement Activity 2014
 
Description DILIC Training Course 
Form Of Engagement Activity A formal working group, expert panel or dialogue
Part Of Official Scheme? No
Geographic Reach National
Primary Audience Other academic audiences (collaborators, peers etc.)
Results and Impact This two-day training course was held in November in Accra (Ghana). Co-organized with the Science and Technology Policy Research Institute, it aimed to provide the state of the art knowledge on the determinants and impact of technology transfer in and to the low income countries, including insights on designing and administrating innovation surveys. Thirty selected participants from Ghana and West Africa attended the event, including a mix of policy makers, academics, and doctoral students. Each participant received a scholarship to meet the costs of participation.

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Year(s) Of Engagement Activity 2014
 
Description DILIC Workshop in Ghana 
Form Of Engagement Activity A formal working group, expert panel or dialogue
Part Of Official Scheme? No
Geographic Reach National
Primary Audience Policymakers/parliamentarians
Results and Impact A workshop to introduce the DILIC project to local academics and policy makers was co-organized with Science and Technology Policy Research Institute (CSIR-STEPRI) in Accra on March 2013. The workshop was attended by more than 40 Ghanaian academics, researchers, policymakers and entrepreneurs.

Inputs and comments from the audience informed the design of the research framework.
Year(s) Of Engagement Activity 2013
 
Description Frontiers in Development Studies Seminar Series at the International Poverty Reduction Centre 
Form Of Engagement Activity A talk or presentation
Part Of Official Scheme? No
Geographic Reach National
Primary Audience Policymakers/parliamentarians
Results and Impact Presentation of the "The diffusion of innovation in low-income countries" (June 2014 - Xiaolan Fu)

Dissemination of the project findings and involvement of local policy makers
Year(s) Of Engagement Activity 2014
 
Description Impact video 
Form Of Engagement Activity A press release, press conference or response to a media enquiry/interview
Part Of Official Scheme? No
Geographic Reach International
Primary Audience Media (as a channel to the public)
Results and Impact A multimedia video is produced to disseminate research findings of DILIC Project. The target audiences are a range of stakeholders, including policy makers, practitioners, research institutes and the private sector. The video is available on the TMCD website and YouTube channels.

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Year(s) Of Engagement Activity 2014
 
Description Keynote speech at the Human Welfare Conference 
Form Of Engagement Activity A talk or presentation
Part Of Official Scheme? No
Geographic Reach International
Primary Audience Postgraduate students
Results and Impact Keynote speech at the Human Welfare Conference in Oxford (June 2014 - Xiaolan Fu)

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Year(s) Of Engagement Activity 2014
 
Description OECD and World Bank Joint Symposium on Inclusive Innovation 
Form Of Engagement Activity A formal working group, expert panel or dialogue
Part Of Official Scheme? No
Geographic Reach International
Primary Audience Policymakers/parliamentarians
Results and Impact OECD and World Bank Joint Symposium on Inclusive Innovation (March 2014 - Xiaolan Fu)

Dissemination of research findings and involvement of policy makers
Year(s) Of Engagement Activity 2014
 
Description Presentation at OXFAM 
Form Of Engagement Activity A talk or presentation
Part Of Official Scheme? No
Geographic Reach International
Primary Audience Professional Practitioners
Results and Impact Presentation of the case study from the project at the OXFAM Lunch Seminar (Giacomo Zanello, February 2014)

Involvement of practitioners
Year(s) Of Engagement Activity 2014
 
Description Secrecy among Kenyan firms may be impeding innovation, SciDev.Net, April 2014 
Form Of Engagement Activity A magazine, newsletter or online publication
Part Of Official Scheme? No
Geographic Reach International
Primary Audience Media (as a channel to the public)
Results and Impact 'Secrecy among Kenyan firms may be impeding innovation', SciDev.Net, April 2014

.
Year(s) Of Engagement Activity 2014
 
Description Speech at the UN Development Cooperation Forum (DCF) High-level Symposium 
Form Of Engagement Activity A talk or presentation
Part Of Official Scheme? Yes
Geographic Reach International
Primary Audience Policymakers/parliamentarians
Results and Impact Prof Xiaolan Fu took a lead in facilitating discussions and drafting policies with a view to promoting the role of diffusion of technology and capacity building in achieving global development goals. Given the gap in technology and capacity between developed countries and their less developed counterparts, it is important for low-income countries to "catch up". The workshop explored policies that would enable this process.

The workshop helped address various challenges that may arise for different development cooperation partners, and examine how technology facilitation and capacity building in the realm of development cooperation could support realizing this ambitious agenda.
Year(s) Of Engagement Activity 2015
 
Description Symposium on new structural economics and the development in Africa 
Form Of Engagement Activity A talk or presentation
Part Of Official Scheme? No
Geographic Reach International
Primary Audience Other academic audiences (collaborators, peers etc.)
Results and Impact Symposium on new structural economics and the development in Africa at Peking University

Dissemination of the project results
Year(s) Of Engagement Activity 2014
 
Description UK Foreign Aid Turns to Research, Nature, April 2014 
Form Of Engagement Activity A magazine, newsletter or online publication
Part Of Official Scheme? No
Geographic Reach International
Primary Audience Media (as a channel to the public)
Results and Impact 'UK Foreign Aid Turns to Research', Nature, April 2014

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Year(s) Of Engagement Activity 2014
 
Description UNCTAD Multi Year Inter-governmental Expert Meeting on Building Productive Capabilities for Sustainable Development 
Form Of Engagement Activity A formal working group, expert panel or dialogue
Part Of Official Scheme? No
Geographic Reach International
Primary Audience Policymakers/parliamentarians
Results and Impact UNCTAD Multi Year Inter-governmental Expert Meeting on Building Productive Capabilities for Sustainable Development (February 2014 - Xiaolan Fu)

Dissemination of research findings and involvement of policy makers
Year(s) Of Engagement Activity 2014
 
Description UNU-WIDER Development Conference 2013 
Form Of Engagement Activity A talk or presentation
Part Of Official Scheme? No
Geographic Reach International
Primary Audience Other academic audiences (collaborators, peers etc.)
Results and Impact Presentation at the UNU-WIDER Development Conference 2013 "Learning to Compete: Industrial Development and Policy in Africa" in Helsinki (Finland) (Giacomo Zanello - June 2013)

Dissemination of research findings
Year(s) Of Engagement Activity 2013