Innovation and entrepreneurship for sustainable development: Lessons from Ethiopia

•Broad-based innovation plans provide developmental solutions to poverty.•Focusing on people's unmet needs is crucial for innovation planning.•In LDCs, technological advances in agriculture and manufacturing are prioritized.•Adoption of existing knowledge is needed, not only knowledge creation.•The role of regional authorities and the private sector should be enhanced. This study explores whether and how innovation policy concepts can be adapted to address the needs of low-income developing countries and how they can advance their sustainable development objectives, such as economic growth, increased productivity, entrepreneurship, and job creation. We devise a conceptual approach for ensuring the advancement of innovation and entrepreneurship in low-income countries, design and test a methodology for implementing the conceptual approach, and utilize the case of Ethiopia for demonstration. The Ethiopian case is noteworthy due to a combination of various factors—high economic and demographic growth over the past years, acute need for job creation and focus on marginalized and vulnerable groups in society, need for regional and spatial planning focus, and relatively weak performance in innovation. Considering the challenging conditions in Ethiopia, we assess the conditions for innovation and entrepreneurship promotion in low-income countries. Moreover, we test the performance of seven ecosystem factors (finance, human capital, infrastructure, information, academy, government services, and culture) through key informant interviews, focus-group discussions, and questionnaires involving all ecosystem actors: government, academic and research institutions, and business leaders. Each factor is evaluated using 91 variables. Two aspects are evaluated for each variable on a 1–5 scale: the perceived importance of the variable for innovation advancement, and the current availability of the variable in Ethiopia. The gap between the two scores indicates the “frustration” level of the respondents. The findings indicate a challenging economic situation and low innovation level, but simultaneously high potential for growth—based on a growing market, significant GDP growth, and considerable government commitment and efforts. The ecosystem analysis results show that respondents attributed high importance to all ecosystem factors, but expressed frustration due to the low availability of the factors, as well as their weak interaction within the ecosystem—low coordination betwe