Technological Catch-up and Indigenous Institutional Infrastructures in Latecomer Natural Resource-related Industries: An Exploration of the Role of EMBRAPA in
Brazil’s Soybean and Pulp and Paper Industries
Paulo N. Figueiredo
University of Brasília ,7 October 2014
RELEVANCE OF THIS STUDY In a world of seven billion people, which is expected to reach 8.5 billion by 2030, there has been an unprecedented demand for increase in resource generation and productivity, such as raw materials, food, renewable energy, water and new industrial inputs and a rising demand for agricultural products and natural resources.
However, worldwide agricultural productivity growth has been slowing down: it is expected only 1% annual growth over the next two decades, much slower than historical trends. To meet the 2030 food and fuel demand would require 175 million to 220 million hectares of cropland. By 2050 there will be a 35% increase in food demand coming largely from the developing economies, especially from China, India, other Asian countries and Africa (see IFPRI, 2012; FAO, 2014; McKinsey Global Institute, 2011, 2014).
Indeed, according to FAO and OECD, to maintain the world level food safety up to 2020, food production should grow by 20%: • EU could increase production by 4% • US and Canada, by 15% • Oceania, by 17% • China, India, Ukraine and Russia by 26% • Brazil could increase food production by 40%
World (Total)
Brazil
USA
10 Largest African countries
Evolution of soybean production (millions of tonnes) across countries
Source: faostat.fao.org
World (Total)
Brazil
USA
10 Largest African countries
Evolution of area harvested of soybean (Ha) across countries
Source: faostat.fao.org
Brazil
USA
10 Largest African countries
World (Total)
Evolution of soybean yield (Kg/ha) across countries
Source: faostat.fao.org
With regard to demand for industrial inputs and fuel, planted forests are renewable resources and sources for important industrial inputs and products such as pulp and paper. Using different types of biotechnological processes, planted forests have become an important source of biomass and function as a platform for new products such as fiber cement, biofuels, biochemicals, bio-plastic, bio-materials, and carbon fibers, in addition to services such as CO2 sequestration (Bracelpa, 2012; www.wbcsd.com).
• Brazil is a forest country, with more than 510 million hectares of forests (61% of its territory). This represents the world’s second forest area, after Russia.
• Brazil has 6.9 million hectares of fully certified planted forests, which represent only 0.8% of its territory.
• Planted forests for pulp and paper production involve 2.1 million hectares or 0.3% of Brazil’s territory.
• All the pulp and paper produced in Brazil, 100% is derived from planted forests, which are renewable resources.
0
2.000
4.000
6.000
8.000
10.000
12.000
14.000
1970 1980 1990 2000 2013
Canadá Finlandia Suécia EUA Brasil
Canada
Finland
Sweden
USA
Brazil
Evolution of quantity of pulp exports (1,000 toneladas)
0
1.000
2.000
3.000
4.000
5.000
6.000
7.000
1970 1980 1990 2000 2013
Canada Finland Sweden USA Brazil
Canada
Finlândia
Suécia
EUA
Brasil
Evolution of value of pulp exports of US$1,000.000)
Brazil ranks as the world’s 4th largest pulp producer and the world’s largest producer of hardwood pulp (‘eucapulp’)
However, among policy makers and academic researchers, particularly in natural resource-endowed developing and emerging economies, natural resource-related industries are, generally, encapsulated as mere ‘commodities’. In terms of importance for industrial and economic growth and development, natural resource-related industries are put in a lower position in relation the so-called ‘higher value’ manufacturing goods. These perspectives on natural resource-related industries seem to have been conditioned by approaches that go back to the 1950s – e.g., the ‘deterioration of terms of trade’ (Prebish, 1950; Singer, 1950).
Negative perspectives on natural resource-related industries have also been considered industries that associate them with low economic growth and poverty – e.g. the ‘resource curse’ argument (e.g., Sachs and Warner, 2001), with a low potential for creating links that develop skills and innovative activities with the rest of the local economy – the ‘enclave’ argument (e.g., Humphereys et al., 2007), with an obstacle to deepening innovative industrial capabilities (e.g., Cimoli and Katz, 2003) and with low knowledge content and low opportunities for innovation (e.g., Cimoli and Correa, 2005, Castaldi et al., 2009). Additionally, in conventional classifications of industrial innovative activities agricultural and natural resource-industries are reduced to ‘low-tech’ sectors with low knowledge intensity (see OECD, 1999; 2003).
Relevant previous research has shown that today’s natural resource-rich advanced economies have obtained relevant industrial, economic and social development by building proper institutional infrastructures to support innovative activities in their natural resource-related industries (e.g., Lederman and Maloney, 2006; Fagerberg et al, 2009). Resource-endowed developing economies may take advantage of the opportunities opened up by natural resource-related industries to achieve innovative performance and competitiveness (Perez, 2008; ECLAC, 2008) and industrial development diversification (Lorentzen, 2008). Indeed, an exclusive focus on the so-called ‘high technologies industries’ (e.g., aircraft, electronics) can be harmful for countries if innovation in other sectors are ignored (OECD, 2012).
However, there is a dearth of empirical studies, from an intra-industry perspective, that examine how developing and emerging economies have built institutional infrastructures to explore opportunities for innovation and international competitiveness from their natural resources industries. Brazil is a an emerging market economy in which agricultural and natural resources related industries have a significant weight in Brazil’s GDP. Over the past several decades, agriculture and forestry-based pulp and paper industries have been undertaking innovative activities that permitted them to achieve world-leading technological and commercial positions.
Previous research suggests that these achievements have involved industry-level efforts on technological capability building with the support of institutional infrastructures such as public research institutes – e.g., the Brazilian Corporation for Agricultural Research (EMBRAPA), related organisations and government policies (e.g., Ekboir, 2003; Mazzoleni and Nelson, 2007; Figueiredo, 2010).
Therefore, this paper will explore this central question:
What has been the role of indigenous institutional infrastructures – knowledge-related institutions such as EMBRAPA and government policies – in the
technological catch-up of the soybean and forestry-based pulp and paper industries in Brazil?
HOW TO ADDRESS THIS RESEARCH QUESTION?
This study adopts the perspective of technological catch-up of organizations based in developing/emerging economies (‘latecomers’) in association with the role of institutional infrastructures.
Technological Catch-Up: When latecomers narrow the innovative capability gap with global leaders. In natural resource-related industries latecomer cannot simply immitate existing technologies developed by global leaders. As a result, latecomers that engage in innovative activities in natural resource-related industries, tend to develop a path-creation technological catch-up process.
Technological Capabilities: What are they? Technological capabilities involve a stock of knowledge-related resources. This stock of resources permits organizations and countries to undertake technological innovation activities. These resources (capabilities) are accumulated in human capital, technical-physical systems and organisational and management processes.
A BROAD PERSPECTIVE ON INNOVATION
Technological capabilities are usually measured by: •R&D expenditure •gross domestic expenditure of R&D •individuals’ qualifications •investments in R&D personnel •US patenting statistics
However, such indicators and proxies are, in most cases, not relevant, when it comes to the measurement of innovative capability building in developing countries: they capture only one fraction of innovative activities.
Levels of innovative capabilities
LEVELS OF INNOVATIVE
CAPABILITIES
Illustrative examples
World leading
Overtaking incumbent innovators at the
international frontier
A substantial and varied body of internationally recognized R&D personnel with a number of
teams of highly specialized engineers and related professionals working on cutting-edge research,
design and development of products/services, production processes and new sources of raw
materials.
Advanced
Closing in on leading global incumbents,
perhaps with differing directions of
innovation
Various types of design and development engineers, researchers and other specialised
professionals in different functional areas within and outside the firm. Among these are those
with additional skills for new knowledge-sharing and external knowledge searching.
Incremental/ Intermediate
Relatively complex improvements and
modifications to products, processes
organisation, and systems
Increased number of specialised engineers and technicians allocated in different and dedicated
organisational units involved in product development, product re -design, process engineering and
automation systems.
Basic
Minor adaptations and improvements, close-to-imitation adoptions
Groups of engineers and qualified technicians working informally on experiments and incipient or
informal R&D activities. Dedicated groups of engineers and qualified technicians and well trained
operators working on the implementation of minor adaptations in products, production processes
and organizational systems with good functional skills and technical skills.
Innovation capabilities
FUZZY BOUNDARY
Production Capabilities
Innovation capability accumulation: changing emphasis on ‘technological’ and ‘organizational’ dimensions
To address this research question, this article draws on long-term qualitative evidence from the standpoint of EMBRAPA, related institutions and government policies oriented to innovative activities in these two industries. This evidence has been gathered through different sources and techniques (e.g. interviews, consultations to archival records and published material from EMBRAPA and related organizations, Brazilian government and other sources.
Embrapa Acre
Embrapa Semi arid
Embrapa Agricultural West
Embrapa Agrosilvopastoral
Embrapa Amapá
Embrapa Western Amazon
Embrapa Eastern Amazon
Embrapa Livestock Southeast
Embrapa Cerrados
Embrapa Temperate Agriculture
Embrapa Cocais
Embrapa Mid North
Embrapa Pantanal
Embrapa Rondonia
Embrapa Roraima
Embrapa Coastal Tablelands
Embrapa Semi arid
Embrapa Technological Information
Embrapa Poducts & Market
Embrapa Coffee
Embrapa Plant Quarantine Embrapa Land
Management
Embrapa Rice and Beans
Embrapa Goats and Sheeps
Embrapa Forestry
Embrapa Beef Cattle
Embrapa Dairy Cattle
Embrapa Vegetables
Embrapa Cassava and Tropical Fruits
Embrapa Maize and Sorghum
Embrapa Fisheries and Aquaculture
Embrapa Soybean
Embrapa Swine and Poultry
Embrapa Wheat
Embrapa Grapes and Wine
Embrapa Cotton
Embrapa Environment
Embrapa Agrobiology
Embrapa Agroenergy Embrapa Food Technology
Embrapa Tropical Agroindustry
Embrapa Studies and
Training
Embrapa Agricultural IT
Embrapa Instruments
Embrapa Satelite Monitoring
Embrapa Genetic Resources and Biotechnology
Embrapa Soils
R&D Department
Department of Technology
Transfer
Finance Management
IT Department
Human Resources Department
Legal Advisory
Communication Secretariat
Strategic Management
President Office
International
Business Secretariat
Administration of Embrapa’s
Biologic Station
State and Supply
Department
Relations Secretariat
Eco
regi
on
al U
nit
s
Nat
ion
al P
rod
uct
Ce
ntr
es
National Thematic Units
Services Units
Executive Board Technology Transfer
Board of Administration
President
Labex Programme
Technical Cooperation
USA Europe (France, UK, Germany)
South America China Japan (Under construction)
Africa (Ghana, Mozambique, Mali, Senegal)
Latin America (Panama, Venezuela)
Centres more related to this article
Current Organisational Structure of EMBRAPA
Source: Own elaboration based on evidence from EMBRAPA
Federal universities and
research institutes
State universities and research
institutes
Other private organization
related directly or indirectly to
agriculture research
Other public organizations
related directly or indirectly to agricultural
research
State organizations
for agricultureres
research (OEPAS)
EMBRAPA
Brazil’s National System of Agricultural Research
Source: Own elaboration based on evidence from EMBRAPA
Technological Catch-Up in Brazil’s Soybeans Industry: The Role of EMBRAPA and related instutional infrastructures
This examination is centred on two cases of significant innovative activities: • The adoption of ZT in Brazil’s Cerrados
• The Development of New Soybeans Cultivars
Evolution of Zero Tillage Development Phases in Brazil (1974-2012)
Source: Adapted from Embrapa (2011); Embrapa Soja (2013)
5,000,000
10,000,000
15,000,000
20,000,000
25,000,000
1974 1980 1982 1986 1990 1994 1998 2002 2006 2012
Period 1974-1979
PHASE I
Period 1979-1991
PHASE II
Period 1991-2000
PHASE III
Period 2000-2012
PHASE IV
Mill
ion
s o
f H
a
32,000,000
2000
EMBRAPA develops a package of Brazilian PD, with the entry of the British company ICI
Technology PD spread in the Midwest and
Cerrado
Expansion of PD in large-scale farms Expansion of PD in
small-scale farms
2008 2009 2010 2011 2012 Total
Database, software biologic
collection and scientific
methodologies
10 7 4 8 9 38
Cultivars generated/launched 5 20 15 10 15 65
Cultivars tested/recommended 7 11 16 11 9 54
Agricultural feedstock,
aAgricultural practice/process
6 1 9 4 2 22
Total 28 39 44 33 35 179
Development of technologies, products and processes at EMBRAPA Soybean
Source: Embrapa Soybean (2013).
Examples of developed new cultivars and productivity increase
Source: Own elaboration based on EMBRAPA’s evidence.
Southern Brazil 1
Parceria- Embrapa e Fundação Meridional
South-western Brazil Parceria- Embrapa e
Fundação Vegetal
North/Northeastern Brazil 2
Parceria- Embrapa e FAPCEN
North/Northeastern Brazil 1
Parceria- Embrapa e Fundação Bahia
Southeastern Brazil Parceria- Embrapa,
Epamig e Fundação Triângulo
Central Brazil Parceria- Embrapa,
Agência Rural e CTPA
Southern Brazil 2
Parceria- Embrapa e Fundação Pró-Sementes
Keys: Brazilian states
1970s 1980s 2003+
Planted areas- soybeans
Partnerships for new soybean cultivars in Project Alpha
Activities/participants
Crops
2002/2003 2003/2004 2004/2005
Demonstration units 92 78 89
Field days 77 69 84
Number of participants 68,552 84,554 97,859
Evolution of Field Days for soybean in Southern Brazil
Source: Embrapa Soybean
Technological Catch-Up in Brazil’s Eucalyptus-based Pulp and Paper Industry: The Role of EMBRAPA and related instutional infrastructures
The Genolyptus Project
The Genolyptus project network
Source: Adapted from Grattapaglia (2010).
Organisational arrangement for the EMBRAPA-led Genolyptus research network
The innovative activities examined in this article have been implemented on the basis of technological capabilities accumulated and catalysed by EMBRAPA with its network of partners. These technological capabilities have a technical dimension centred on human resources, skills, and knowledge bases, and an organizational dimension. As EMBRAPA’s innovative capabilities increased, its organisational structure developed from a centralised approach towards more networked research capabilities. The accumulation and strengthening of this organisational basis over time has been decisive to support innovative activities in these two industries. The accumulation of these innovative technological capabilities have been influenced by intra-organisational efforts and changes in government policies, especially since the 1990s.
SUMMARY OF MAIN FINDINGS
1- In the soybean industry, EMBRAPA has played a significant role in the implementation of innovative activities ever since the early stages of this industry’s technological capability building process. In the forestry-based pulp and paper industry, EMBRAPA has played a more significant role after leading firms had accumulated world-leading innovative capabilities. 2- An important feature of EMBRAPA’s role in these two industries refers to its application-oriented research, linked with industry’s demands and problems. This evidence has important implications for policy makers in developing/emerging economies because they tend to allocate funding to inventive and innovative activities that are disconnected from demands and needs from the industry and economy.
Specifically, the study suggests that:
Three major phases in the organisational model to support innovative activities at EMBRAPA: Phase I (1960-1980s): creation and organisational concentration Phase II (1990s): organisational decentralization Phase III (2000-2012): distributed research networks
3- The role of EMBRAPA in the innovative activities of these two industries was not based on a linear perspective on innovation (in which innovative activities would trickle down from public research institutes to industry). Neither has EMBRAPA operated individually. Instead, EMBRAPA’s activities have increasingly been undertaken on the basis of a ‘system’ involving extensive partnerships with other public and private research institutes and universities and firms. EMBRAPA thus has operated on the basis of a network of partners. In the soybean industry, specifically, there has been a growing interaction with subsidiaries of multinational enterprises (MNEs), which has increasingly been an important aspect of innovation in the world seeds industry.
Innovative capability accumulation catalysed by EMBRAPA for soybean and pulp and paper industries in Brazil
EMBRAPA’s distributed
innovative technological
capabilities
Public and private
international research institutes
and speciliased laboratories
Multinational
enterprises
(MNEs)
Training centres specialised
in technical, organisational
and anagerial skills
development
International
universities
Federal-level and state-level
universities in Brazil
Internal R&D units and
related areas
Other public organisations
related directly and/or
indirectly to agricultural
research
Other private organisations
Related directly and indirectly to
agricultural research
4- The study indicates that innovative activities that generate significant impact on productivity do not necessarily reflect only sophisticated R&D efforts. There are other types of non-R&D innovative activities which are also relevant. The implementation of the zero-tillage (ZT) technology in Brazil’s soybean industry represents an effective creative imitation; there were several inventive activities during the imitation/adaptation to local soil and climate conditions. This evidence supports previous studies about the importance of non-R&D innovative activities to innovative and competitive performance of latecomer organisations. It has implications for the potential emulation of EMBRAPA’s experience by other developing economies: policy makers should adopt a comprehensive perspective on innovation based on a spectrum of activities: from duplicative copy, creative imitation to progressive levels of change and novelty.
5- In addition to EMBRAPA’s efforts and related knowledge-based institutions, government policies have played an important role in the technological catch-up of these two industries. In the soybean industry, there were the support to agricultural expansion (1970s) and intellectual property rights (1990s). In both industries, other policies involved the opening-up of the economy (early 1990s), which brought competition to Brazilian economy and favoured innovative efforts, and the creation of government arrangements for innovation funding. 6- Although well-designed institutional infrastructures are obviously necessary for the achievement of industrial innovation and leadership, a large part of this achievement depends, on the one hand, on the functioning of these institutional infrastructures; on the other hand, such achievements depend on the nature and dynamics of the industry’s own strategic choices and related innovation efforts. Although this appears to be well known, the role of industry -level innovation efforts seems the ignored or underestimated in the design and implementation of industrial innovation policies.
7- The article challenges common generalisations that encapsulate natural resource-related industries in one single category characterised by ‘low knowledge content’ and ‘absence of innovation opportunities’. Instead, by drawing on evidence of the technological and commercial achievements of Brazil’s soybean and forestry-based pulp and paper industries, this article demonstrates a wide range of opportunities for technological innovation and international competitiveness that can be achieved in natural resource-related industries with technological capability building.
Some Implications for other resource-rich countries The emulation of the EMBRAPA’s experience by other resource-rich developing and emerging economies, such as those of Africa, may depend on at least two factors. The first refers to the building indigenous technological capabilities to absorb external knowledge and to implement local production-based and innovative activities. In relation to the development of technological capabilities two components deserve careful attention: the formation of a human capital basis and the formation of an organizational basis.
The building of these capabilities involve deliberate and effective efforts by government, cooperatives, farmers and other private firms, rural extension organisations and other stakeholders. The building of technological capabilities does not depend only on availability of funding but mainly on the effectiveness of learning mechanisms. The second factor relates to the building of and/or improvement of components of the institutional framework – involving supporting knowledge-related institutions to provide human capital but also to support innovative activities. They would also involve the design of specific government policies.
Finally, one aspect of the EMBRAPA’s experience seems to have particular relevance to the context of sub-Saharan Africa: it refers to the experience of achieving centralised, or large-scale, coordination and ‘critical mass’ in application-oriented research, while at the same time fostering a decentralised engagement with producers to understand the diversity of problems faced by farmers in different areas.
There is some evidence that African governments are attempting to achieve bigger markets and a pooling of technical resources, through the formation of regional trading areas. These include: SADC (Southern African Development Community); EAC (East African Community) and ECOWAS (Economic Community of West African States). Some of the aspects of the functioning of EMBRAPA, and also its problems and challenges, could perhaps contribute to shed some light on the on how these regional bodies tackle the technical aspects of natural resource management and policy strengthen agricultural research in Africa