Rapid and consistent economic growth ofEthiopia over the past decade has contributed to reducingthe number of people living in poverty. The Government ofEthiopia has created the growth and transformation plan(GTP), focusing on two overarching themes: fosteringcompetitiveness and employment, and enhancing resilience andreducing vulnerabilities. This plan recognizes that forpoverty reduction and economic growth to be sustainable, theEthiopian economic structure will have to undergo afundamental transformation. In accordance with a focus onpoverty reduction and economic growth, the GTP hasidentified five main levers for change: public sectorinvestment in infrastructure to lay the ground for privatesector development, enhancement of policies and regulationsto provide an environment conducive to competitiveness andproductivity, expanding access to credit for small andmedium size enterprises, provision of training and educationto augment the supply of skilled labor, and improved accessto land. Technological adoption and innovation will play acrucial role in delivering the goals laid out in the GTP.Participation in foreign markets also induces firms tobecome more innovative, a phenomenon known as learningthrough exporting, as observed among Ethiopian leatherexporters. Another vital determinant of innovative activityis the accumulation of human capital and the skill level ofthe workforce. This study seeks: (i) to empirically analyzethe extent of innovative activities that formal firms areundertaking in Ethiopia; (ii) to conduct a review of theexisting innovation landscape; and (iii) to identifyopportunities to foster innovations at the base of thepyramid (BoP) in Ethiopia. This study is structured asfollows: chapter one gives introduction. Chapter twoprovides a detailed overview of the characteristics ofgrowth and innovation, by providing key insights based onthe enterprise survey analysis on the characteristics,motivations, operational and market environment andconstraints of the innovators in Ethiopia. Chapter threeassesses the innovation landscape in Ethiopia, by looking atthe governmental and private agencies responsible to promoteinnovation, as well as active programs, and donorinitiatives which may play a role in promoting firm leveland pro-poor innovations. Chapter four provides policyrecommendations to promote innovation in Ethiopia both atthe firm level and in the form of pro-poor initiatives.
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