Prof. José A lexandre O. Vera-Cruz

1. Learning to manage public funds for research and extension in agriculture : The Mexican Produce Foundations Wits Innovation for Development Symposium February 24-26 2010 Prof. José Alexandre O. Vera-Cruz Postgraduate Programme in Economics and Management of Innovation Universidad Autónoma Metropolitana Campus Xochimilco (UAM-X)

2. The problem • Segmentation of the markets and product diversification • More complexity of agriculture in developing and developed countries • New products, new markets and new actors • But also new opportunities for innovation • A critical problem is how to build the capabilities needed for participating in dynamics markets • Innovation studies have focused mostly on industrial firms • Growing interest in the agriculture sector • Limited studies in the role of intermediary institutions

3. Aim of this presentation This presentation focuses on how an intermediary institution that manages public funds for research and extension in Mexico could sustain organizational innovations over extended periods, and how it could learn and adapt to maximize its impact on the agricultural innovation system.

4. Agenda Related literature Methodology Characteristics of the Agriculture Innovation System in Mexico The PF: an institutional innovation Factors influencing learning processes in the PF Final refections

5. Related literature • Complex Adaptive Systems (CAS) • Different agent’s strategies: reaction and adaptation to the environmental changes • CAS evolve through the combination of initial conditions, multiple interactions, long run trends and random variations. • CAS policy interventions are based on influencing the dynamics of evolution, especially variation and selection (Axelrod& Cohen 1999; Buchanan 2002; Crutchfield & Schuster 2003; Kauffman 2000&1995; Nicolis & Prigogine 1989; Watts 1999) • Organizational learning • Learning: as the process by which people and organizations create knowledge and acquire capabilities. • Deliberate strategy and investment -not costless • Knowledge: fruit of learning and feedback of learning processes • Three levels: individual, organizational and network. (Lall 1987;1992; Bell & Pavitt 1995; Kim & Nelson 2000; Simon 1996, Dodgson 1993, Dutrénit 2000, Vera-Cruz 2004; 2006)

6. Organizational culture • Basic assumptions, values and beliefs established in the early life; hard to change, but not immutable. (Hampden-Turner 1990; Schein 1984;1991; Handy 1993;1995; Detert et al. 2000; Noorderhaven et al. 2002) • Culture affects learning and governance: individual learning vs collective learning; vertical & horizontal decision-making (Leonard-Barton 1995; Garvin 1993; Teece & Pisano 1994, Vera-Cruz 2004) • Intermediary institutions in the NSI • Role of intermediation (Howells, 2006) • Brokers in the agriculture sector (Ekboir et al, 2006;2009: Klerkx, Hall & Leeuwis, 2009; Klerks & Leeuwis 2009) • Effectiveness of public intervention in R&D • Based on the assumption that CF are an effective mechanism, several authors analyze their impact (World Bank, 2006a; Toro & Espinoza, 2003; Echeverría and Elliot, 2002; García & Sanz-Menéndez, 2005; Huffman & Just, 2000; Laudel, 2005) • Most of the effects can also be obtained with other allocation mechanisms (e.g., non-bid contracts). Still limited knowledge about the effectiveness of CF from the perspective of the funding agency; particularly about the fund assignation process. (Vera-Cruz et al, 2008)

7. Methodology • Questions: how, why  Case study methodology • The case: COFUPRO, the coordinator of the PF, an intermediary institution • Unit of analysis: activities developed by COFUPRO to coordinate the PF and to interact with other actors of the agriculture innovation system • Different sources of evidence: • 47 Interviews with actual and former presidents and managers of COFUPRO, researchers, farmers, government officials • Research design considered Yin’s (2003) recommendations to make it robust: • Construct validity • Triangulation of information to avoid bias • External validity: replication logic was used for the FP cases analysed

8. Characteristics of the Mexican Agriculture Innovation System • The agricultural sector prior to 1982 • Import substitution industrialization (ISI): Agriculture exports funded industrialization (42% of total exports) • Green revolution and creation of NARO (INIFAP) • Focus on products of social importance and self-sufficiency in food production (corn, beans, barley, etc.) • Policy supported small producers • First huge increase of agriculture productivity, then decrease of productivity • Changes after the debt crisis of 1982 • Crisis of the ISI and opening up of the economy (NAFTA) • Emergence of new exports crops lead by private firms • Limited policy intervention • Reduced funds for NARO and crisis of agricultural research and extension • The democratization process (2000s) • Successful exports of vegetables (4 times more than in 1980) • Reforms of NARO but still limited funds • New agents, new funding mechanisms and concerns about strengthening agricultural innovation: The Produce Foundations

9. Today there are an important set of agents in the agriculture system of innovation: • NARO and other Public Research Centres, • Agricultural Universities and specialised areas in general universities, • Financial institutions, • Small and large producers, social and private property • % SAGARPA in the GERD: 7.5% • GERD of the agriculture sector: 0.7% • Funding research in the agriculture sector: • Sectoral Fund for Agriculture Research, • CF operated by CONACYT, SAGARPA and COFUPRO (from 2002) • Budget: 14 millions dollars in 2004 and 2005 • 32 CF for Agriculture Research • CF managed by the Produce Foundations from 1996 • Budget: 31 millions dollars in 2005

10. The PF: an institutional innovation • Produce Foundations (PF) were created in 1996 to manage competitive funds for agricultural research • 32 PF (one in each state) • In 1998 the PF created COFUPRO, a national coordinating office

11. What were the PF meant to do? • obtain additional funding for INIFAP (the main NARO) • allow farmers to influence the allocation of research funds • manage public research funds • PF are an intermediary between the government and academic researchers • Each PF manages a CF oriented to fund research that tackle the technological needs of its state(remember that Mexico is a federation) • Joint participation with CONACYT in a Sectoral fund oriented to regional and more general projects ¡Top-down creation but decentralised management!

12. The process of creation … • The NARO (INIFAP) negotiated with each state governor the creation of the PF • The state governor invited “leading” farmers to join the board and choose the president • Each PF is managed by a board and a small professional managerial structure • The board is integrated by representatives of the federal and state governments and “progressive” and influential farmers • The governor retained control of the board • Main assumption: leading farmers knew how to “guide” research and extension • A few farmers and managers of different PF started to exchange information on operational procedures…. Differentiation of PF ¡Rupture and more involvement from the bottom!

13. … Differentiation of the PF • The exchanges between farmers enabled differentiation of a few innovative PF • 32 PF allowed variation and selection based on learning processes • The process was influenced by: • Presence of innovative farmers in the PF board (leadership) • The farmer’s experiences in their own organizations were brought to the Foundation (sharing of knowledge) • Skills of the managers generated (new practices) • The political climate in the state (some time positive some time negative)

14. Creation of COFUPRO: the national coordinating office • A few farmers demanded and gained independence from the state governments • They saw the need to have one voice to talk to the federal government • Creation of COFUPRO (the coordination board) to negotiate with federal government; it also coordinates the collective learning and diffusion of best practices • A few managers played a crucial role in the learning process of COFUPRO ¡From top-down to bottom-up!

15. Some evidence of learning practices related to improving the management of CF • Between 1996 and 2004: • The farmers adhered to the traditional linear vision of science • Researchers only needed to know which problems the farmers faced to eventually develop appropriate solutions. • PF’s efforts were directed towards setting research priorities and developing administrative tools, especially the call for proposals. • Results: The priorities setting process opened channels of communication between researchers and farmers. • From 2005 until now and based on learning to manage this CF: • Calls for proposals are designed with very specific topics (almost the project title). The decision process has two stages: • the institutions willing to bid must explain their strengths on the topic they will research • the pre-selected institutions are requested to prepare a research proposal. • Larger control on the quality of the research outputs instead on administrative procedures.

16. Factors influencing learning by PF • Origin of the PF • Bottom-up  Articulation with local needs, communication with local actors (ease test and feedback from new practices and programs) • Diversity of PF (32), visions and practices  selection of the best practices • Human resources • Influential farmers, independents of the public sector • Professional management • Governance structures • Space for collective actions • Decentralization that allows experimentation • Central structures that foster collective learning • Political (President is a farmer) and Technical (professional managers) • Organizational culture • Combination of 2 cultures: president and managers • Sharing experiences, new routines • Unevenness of learning between PF

17. Final reflections Why could sustain organizational innovations over extended periods? • Bottom-up • Farmers in the board and technical management • High users’ involvement • Focus on networking • A flexible agency and learning from experience • Keep independence from the public sector Where the impact on agricultural innovation system come from? • Fostering communication among different actors • Fostering change in the research institutions • Influencing the design and implementation of agricultural policies • Influencing the allocation of funds for agricultural research • Increase the orientation of researchers to the local farmers needs Policy implications • Top-down vs.. Botom-up institutions • The case of the PF show the advantages of a bottom-up perspective • Flexibility and building their own dynamics are crucial for success