Rural revelations: Innovation is not just for cities

Across the world, innovation efforts are focussed on developing cutting-edge science and technology: generating patents for new medicines, machines, and merchandise. These innovations enrich our lives, and many will also help tackle the great social challenges of our time. But broader forms of innovation must also be nurtured, especially in rural areas.

A system for cities

Only a handful of “inventive industries” engage in formal R&D that generates patents, principally in science, engineering, and technical professions. These are concentrated in large cities, with strong links to research universities, IT sectors or manufacturing.

The regions with the highest level of patents-per-million inhabitants include Bavaria, Germany with its manufacturing capital Munich. The capital region of Korea, California in the US with the Silicon Valley, and Southern-Kanto in Japan with its capital Tokyo are among others in this group.

Public innovation policies – and investments – that seek to maximise formal research and patenting are naturally drawn to these successful places, contributing to widening regional inequalities. Strikingly, across OECD countries, tax support represented 56% of total government innovation support in 2018 compared to just 36% in 2006 – incentives that are geared to formal research and – as a result – cities.

Another path

Yet innovation in rural places tends to follow a different path – focussing on improving production processes, business models or social innovations that are not uniquely profit-driven. These are often overlooked by standard policies and programmes for innovation but are central to growth and development. Indeed, Joseph Schumpeter’s innovation was driven by entrepreneurs’ “new combinations”, which unite existing technologies and resources to create new opportunities.

This is a path that Japan is determined to take. Field for Knowledge Integration and Innovation. (FKII) is working with rural producers to create new linkages between firms, producers, farmers, universities, and research institutions. It is delivering impressive results.

The structure of the FKII

Sake and soil

A successful platform for aquaculture innovation was founded in Japan with FKII support in 2016. It brought together more than 100 participants including fisheries co-operatives, IT companies and universities to devise a new way of using “sake lees” from a local brewery as fish feed. Sake lees, rich in Umami (amino-acids), turned out to be a great form of fish food. The Sake-lees-fed mackerels proved to be a huge commercial success and a great collaboration project with Obama City in Fukui Prefecture.

In another example, the owner of a racehorse ranch in Ibaraki Prefecture had been struggling with the disposal of horse droppings. This was costly and a nuisance to neighbours, so the owner sought advice from an expert in soil science which inspired a collaboration to produce rich compost from the droppings which boost the quality of soil. Through collaborative work under FKII activities, they successfully began to sell the compost to local farmers and individual customers in 2019.

What can we learn?

These stories offer lessons on how to drive rural innovation. First, both projects begin with a challenge in need of a solution. Necessity is the mother of innovation, especially in rural areas, and helps to mobilise support from unexpected quarters. Second, success is not always linked to formal innovation channels, but can instead be generated by new connections. These include people with different fields and backgrounds and knowledge of different techniques and resources. Third, they highlight the critical role of the entrepreneur in experimenting with new models and making a commercial success of new approaches.

The rise of the rural entrepreneur?

As Japan’s FKII programme has shown, public action can play a critical role in helping rural entrepreneurs solve problems and make connections that benefit business and the environment. But entrepreneurs provide the spark for the ideas generated to catch light.

With many rural areas losing bright young talent to big cities, policy makers must also focus on boosting rural entrepreneurship. They need to attract entrepreneurs to rural areas and also generate more home-grown talent, which already benefits from local connections, knowledge, and resources.

In 2019, Japan’s Ministry of Agriculture, Forestry and Fisheries of Japan (MAFF) initiated a public-private partnership programme which takes in bright ideas of local innovators to bring about new combination in rural areas. Besides, in 2021, MAFF launched a training programme for rural animators so that they could be the one who would motivate local people to make a difference.

These examples show that – with the right support – rural areas can be just as rich in innovation as they are in natural resources. But to thrive, they need policy makers to think outside the box (and the city), to adopt new models and approaches that nurture innovation in all its forms and allow rural entrepreneurs to take centre stage.

Read more on the work of the OECD on Rural innovations here.

Counsellor at Permanent Delegation of Japan | + posts

Hiroko Kuno is an agricultural counsellor at the Permanent Delegation of Japan to the OECD. Prior to her present position, she was the director of the Food Security Office at the Ministry of Agriculture, Forestry and Fisheries of Japan (MAFF) where she worked on the disrupted food supply chain due to COVID-19 as well as the Ukraine situation, and actively engaged in new policy measures regarding these issues. She also promoted rural open innovation as the director of the Academia-Industry Collaboration Office at MAFF. Hiroko has a degree in LLM(Master of Laws)from the University of Pennsylvania Carey Law School and is an attorney at law admitted to practice in New York State.

Policy analyst at OECD Centre for Entrepreneurship, SMEs, Regions and Cities | + posts

Keizo Nonomura is a policy analyst at the OECD Centre for Entrepreneurship, SMEs, Regions and Cities where he works for rural innovation and primary sector related issues. Prior to joining the OECD in September 2021, Keizo worked for the Ministry of Agriculture, Forestry and Fisheries of Japan for around 20 years on broad issues concerning agricultural policy and rural development. He holds a MSc in International Development from the University of Manchester and a MSc in Geographical Information Science from the University of Edinburgh.