Innovation systems and natural resources - the case of sugarcane in Brazil

From the perspective that interactive learning is a fundamental process in economic development this dissertation analyses two overlapping topics. One is the role of natural resources in economic development, and the other is the art of building innovation systems for development. This is done by studying the innovation system that has been created around mainly sugarcane and ethanol production in São Paulo State, Brazil. Natural resources are often perceived as harmful for economic development which is illustrated by the popularity of the resource curse. The dissertation illustrates that natural resources must be conceptualised as non-finite, endogenous and dynamic, and that natural resource-based industries can be proactive participants in processes of development that involves an increasing division of labour, diversification, complexity and structural change. The main point is that the resource curse is not really about natural resources but about learning – or the absence of it. Natural resources do not make countries poor, but weak innovation systems do. The examples of natural resource-based development presented reflect situations where natural resources are combined with an innovation system – a natural resource-based innovation system. The case study illustrates that this perception of natural resources is a fruitful way to understand the link between natural resources and development. The dissertation also indicates that the ecological idiosyncrasy of natural resources may stimulate knowledge development among passive learners to a higher extent than e.g. manufacturing activities. The crucial point on the relation between natural resources and development is that there are no a priori reasons to expect that natural resource-based industries can not led development, and thus be used as a platform for development policy in countries that are dominated by this type of production systems. In the learning economy the international unequal distribution of learning capabilities is the main factor behind differences in wealth and poverty. There is a ‘learning gap’ between developed countries and less developed countries. For less developed countries the only way to close this ‘gap’ is by learning to learn – this can be rephrased as building learning capabilities. Since learning and capability building are systemic processes, building innovation systems is the only way to beneficially participate in the learning economy. Still, both the application of the innovation system approach to less developed countries, and the research area of how to build innovation systems are underdeveloped, and without a broadly-accepted theoretical framework. This dissertation presents a framework for such analysis and looks at how and under which circumstances a sugarcane-based innovation system was formed and grew in Brazil. In the framework the concept of ‘interactive learning space’ is central. It is complemented by a process approach, where focus is on seven key processes that are thought to be of general importance in innovation systems. These concepts represent complementary tools to grasp structural dynamics and process dynamics, respectively, and in turn their interaction. The empirical analysis showed that formation and growth of the innovation system was a result of a combination of learning capabilities, learning opportunities and demand structure that interacted with ‘external’ events. It was characteristic that interactive learning spaces were driven by urgent needs. This generated causal chains of events where key processes stimulated, and were stimulated by, institutional, organisational and technological innovation. The case study supports the ‘gardening doctrine’ which states that innovation systems can not be built. Instead, innovation systems should be understood as social organisms that must be nurtured, supported and protected to grow – as delicate flowers in a garden.