Policy Brief 1: Promoting Human Capital and Innovation in Low Income Countries (LICs)

Abstract

In a research article entitled ‘Human capital and innovation in developing countries: a firm level study’ Van Uden and co-authors analysed the relationship between firms’ human capital endowments and firm-level practices to improve innovative output. This was analysed using employee schooling level as the human capital endowment and firm-level (company) training as a firm-level practice. Moreover, the study considered free time within working time (‘slack’ time’) that employees can spend on their own innovative ideas as an additional firm-level practice. They referred to evidence from company 3M, where employees spend 15% of their working time on projects of their own choosing, and conclude that such employees have a higher chance of becoming innovative. There is an implicit assumption that if different factors spur innovation, combining these factors will result in a strong impact. Therefore, different combinations of firm-level practices with regard to training and slack time were related to innovation, which was defined as the introduction of new or significantly improved products or services by the firm. The data collected (survey) concerned a sample of SMEs in Kenya, Tanzania and Uganda (2,076 SMEs in total). This policy brief presents the research outcomes and discusses several policy implications that could be considered by governments, business managers and development agencies