IDEAS home Printed from https://ideas.repec.org/a/eee/wdevel/v125y2020ics0305750x19302670.html
   My bibliography  Save this article

Beyond the neoliberal-statist divide on the drivers of innovation: A political settlements reading of Kenya’s M-Pesa success story

Author

Listed:
  • Tyce, Matthew

Abstract

While there is now broad consensus that innovation is a key driver of productivity growth, debates about the state’s role in promoting innovation remain polarised between two competing analytical and ideological paradigms. The first is neoliberalism, which confines the state to correcting market failures, ensuring competition and supporting the innovative force of the private-sector. Drawing on the developmental state phenomenon, the second calls for a strong and visionary state to drive innovation by targeting industries for investment and protecting firms until they are ready to face competition. The literature broadly falls within these camps, identifying innovation as a market- or state-driven process. This paper challenges both, arguing that there are multiple pathways to innovation, many of which represent a messier middle ground. The case of Kenya, which has become a hotbed for mobile money innovation since launching its pioneering M-Pesa service in 2007, is used to make this argument. Neoliberal and statist accounts fail to explain this story, which needs to be framed in relation to underlying power relations that span this divide. The M-Pesa success has played out within a highly-particularistic and patronage-based political context, whereby the interests of key groups within Kenya’s political settlement have crystallised to shield M-Pesa's parent company Safaricom, whose ownership structure and strategic partnerships draw in elites from across the political spectrum, from competition. This has afforded Safaricom space to innovate with M-Pesa, engendering a form of ‘developmental patrimonialism’ within which it has become a vehicle for rents to be centralised and deployed within strategic industries according to a long-term vision, with profits parcelled back to elites through generous dividend pay-outs. Concluding, the paper calls for more nuanced political economy understandings of the drivers of innovation, and mobile money adoption in particular.

Suggested Citation

  • Tyce, Matthew, 2020. "Beyond the neoliberal-statist divide on the drivers of innovation: A political settlements reading of Kenya’s M-Pesa success story," World Development, Elsevier, vol. 125(C).
    • Handle: RePEc:eee:wdevel:v:125:y:2020:i:c:s0305750x19302670
    DOI: 10.1016/j.worlddev.2019.104621
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0305750X19302670
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.worlddev.2019.104621?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Paola Perez-Aleman & Flavia Chaves Alves, 2017. "Reinventing industrial policy at the frontier: catalysing learning and innovation in Brazil," Cambridge Journal of Regions, Economy and Society, Cambridge Political Economy Society, vol. 10(1), pages 151-171.
    2. Lepoutre, Jan & Oguntoye, Augustina, 2018. "The (non-)emergence of mobile money systems in Sub-Saharan Africa: A comparative multilevel perspective of Kenya and Nigeria," Technological Forecasting and Social Change, Elsevier, vol. 131(C), pages 262-275.
    3. Daron Acemoglu & Ufuk Akcigit, 2012. "Intellectual Property Rights Policy, Competition And Innovation," Journal of the European Economic Association, European Economic Association, vol. 10(1), pages 1-42, February.
    4. Crespi, Gustavo & Zuniga, Pluvia, 2012. "Innovation and Productivity: Evidence from Six Latin American Countries," World Development, Elsevier, vol. 40(2), pages 273-290.
    5. Busom, Isabel & Vélez-Ospina, Jorge Andrés, 2017. "Innovation, Public Support, and Productivity in Colombia. A Cross-industry Comparison," World Development, Elsevier, vol. 99(C), pages 75-94.
    6. Ha-Joon Chang & Ali Cheema & L. Mises, 2002. "Conditions For Successful Technology Policy In Developing Countries—Learning Rents, State Structures, And Institutions," Economics of Innovation and New Technology, Taylor & Francis Journals, vol. 11(4-5), pages 369-398.
    7. North, Douglass C. & Weingast, Barry R., 1989. "Constitutions and Commitment: The Evolution of Institutions Governing Public Choice in Seventeenth-Century England," The Journal of Economic History, Cambridge University Press, vol. 49(4), pages 803-832, December.
    8. Sunduzwayo Madise, 2019. "The Regulation of Mobile Money," Palgrave Macmillan Studies in Banking and Financial Institutions, Palgrave Macmillan, number 978-3-030-13831-8, June.
    9. Whitfield,Lindsay & Therkildsen,Ole & Buur,Lars & Kjær,Anne Mette, 2015. "The Politics of African Industrial Policy," Cambridge Books, Cambridge University Press, number 9781107105317, September.
    10. Diego Comin & Martí Mestieri, 2018. "If Technology Has Arrived Everywhere, Why Has Income Diverged?," American Economic Journal: Macroeconomics, American Economic Association, vol. 10(3), pages 137-178, July.
    11. Waverman, Leonard & Koutroumpis, Pantelis, 2011. "Benchmarking telecoms regulation - The Telecommunications Regulatory Governance Index (TRGI)," Telecommunications Policy, Elsevier, vol. 35(5), pages 450-468, June.
    12. Lant Pritchett, 1997. "Divergence, Big Time," Journal of Economic Perspectives, American Economic Association, vol. 11(3), pages 3-17, Summer.
    13. Geoffrey C. Chen & Charles Lees, 2016. "Growing China’s renewables sector: a developmental state approach," New Political Economy, Taylor & Francis Journals, vol. 21(6), pages 574-586, November.
    14. David Porteous, 2009. "Mobilizing Money through Enabling Regulation," Innovations: Technology, Governance, Globalization, MIT Press, vol. 4(1), pages 75-90, January.
    15. Erkki Karo, 2018. "Mission-oriented innovation policies and bureaucracies in East Asia," Industrial and Corporate Change, Oxford University Press and the Associazione ICC, vol. 27(5), pages 867-881.
    16. Melody, William H, 1997. "On the meaning and importance of 'independence' in telecom reform," Telecommunications Policy, Elsevier, vol. 21(3), pages 195-199, April.
    17. Wang, Jue, 2018. "Innovation and government intervention: A comparison of Singapore and Hong Kong," Research Policy, Elsevier, vol. 47(2), pages 399-412.
    18. Robert H. Wade, 2018. "The Developmental State: Dead or Alive?," Development and Change, International Institute of Social Studies, vol. 49(2), pages 518-546, March.
    19. Wallsten, Scott, 2002. "Does sequencing matter? regulation and privatization in telecommunications reforms," Policy Research Working Paper Series 2817, The World Bank.
    20. Kenneth Arrow, 1962. "Economic Welfare and the Allocation of Resources for Invention," NBER Chapters, in: The Rate and Direction of Inventive Activity: Economic and Social Factors, pages 609-626, National Bureau of Economic Research, Inc.
    21. Gillwald, Alison, 2005. "Good intentions, poor outcomes: Telecommunications reform in South Africa," Telecommunications Policy, Elsevier, vol. 29(7), pages 469-491, August.
    22. Ho, Chun-Yu & Huang, Shaoqing & Shi, Hao & Wu, Jun, 2018. "Financial deepening and innovation: The role of political institutions," World Development, Elsevier, vol. 109(C), pages 1-13.
    23. Williams, Timothy P., 2017. "The Political Economy of Primary Education: Lessons from Rwanda," World Development, Elsevier, vol. 96(C), pages 550-561.
    24. Arnott, Richard & Stiglitz, Joseph E, 1991. "Moral Hazard and Nonmarket Institutions: Dysfunctional Crowding Out or Peer Monitoring?," American Economic Review, American Economic Association, vol. 81(1), pages 179-190, March.
    25. AfDB AfDB, . "Annual Report 2012," Annual Report, African Development Bank, number 461.
    26. Lashitew, Addisu A. & van Tulder, Rob & Liasse, Yann, 2019. "Mobile phones for financial inclusion: What explains the diffusion of mobile money innovations?," Research Policy, Elsevier, vol. 48(5), pages 1201-1215.
    27. Xiaolan Fu & Jing Zhang, 2011. "Technology transfer, indigenous innovation and leapfrogging in green technology: the solar-PV industry in China and India," Journal of Chinese Economic and Business Studies, Taylor & Francis Journals, vol. 9(4), pages 329-347, August.
    28. Mary Hallward-Driemeier & Lant Pritchett, 2015. "How Business Is Done in the Developing World: Deals versus Rules," Journal of Economic Perspectives, American Economic Association, vol. 29(3), pages 121-140, Summer.
    29. Rainer Kattel & Mariana Mazzucato, 2018. "Mission-oriented innovation policy and dynamic capabilities in the public sector," Industrial and Corporate Change, Oxford University Press and the Associazione ICC, vol. 27(5), pages 787-801.
    30. Isabel Busom & Jorge-Andrés Vélez-Ospina, 2017. "Innovation, public support and productivity in colombia," Working Papers wpdea1701, Department of Applied Economics at Universitat Autonoma of Barcelona.
    31. WorldFish, 2013. "Annual report 2012/13," Monographs, The WorldFish Center, number 40306, April.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Bacha, Radia & Gasmi, Farid & Metevier, Samantha, 2024. "Broadband adoption in Algeria and the structural determinants of its pace," Telecommunications Policy, Elsevier, vol. 48(6).
    2. Michael Odijie, 2024. "Nigeria's Sugar Master Plan: Ignoring losers from industrial policy can be costly," Development Policy Review, Overseas Development Institute, vol. 42(2), March.
    3. Bacha, Radia & Gasmi, Farid, 2022. "The broadband diffusion process and its determinants in Algeria: A simultaneous estimation," TSE Working Papers 22-1309, Toulouse School of Economics (TSE).
    4. de Jong, Abe & Shahriar, Abu Zafar & Shazia, Farhan, 2022. "Reaching out to the unbanked: The role of political ideology in financial inclusion," Journal of International Money and Finance, Elsevier, vol. 126(C).
    5. Alenka Lena Klopcic & Jana Hojnik & Stefan Bojnec & Drago Papler, 2020. "Global Transition to the Subscription Economy: Literature Review on Business Model Changes in the Media Landscape," Managing Global Transitions, University of Primorska, Faculty of Management Koper, vol. 18(4 (Winter), pages 323-348.
    6. Mann, Laura & Iazzolino, Gianluca, 2021. "From development state to corporate leviathan: historicizing the infrastructural performativity of digital platforms within Kenyan agriculture," LSE Research Online Documents on Economics 110725, London School of Economics and Political Science, LSE Library.
    7. Osabutey, Ellis L.C. & Jackson, Terence, 2024. "Mobile money and financial inclusion in Africa: Emerging themes, challenges and policy implications," Technological Forecasting and Social Change, Elsevier, vol. 202(C).
    8. Koomson, Isaac & Bukari, Chei & Villano, Renato A, 2021. "Mobile money adoption and response to idiosyncratic shocks: Empirics from five selected countries in sub-Saharan Africa," Technological Forecasting and Social Change, Elsevier, vol. 167(C).
    9. Laura Mann & Gianluca Iazzolino, 2021. "From Development State to Corporate Leviathan: Historicizing the Infrastructural Performativity of Digital Platforms within Kenyan Agriculture," Development and Change, International Institute of Social Studies, vol. 52(4), pages 829-854, July.
    10. Anthea Paelo & Simon Roberts, 2022. "Competition and Regulation of Mobile Money Platforms in Africa: A Comparative Analysis of Kenya and Uganda," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 60(3), pages 463-489, May.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Edeh, Jude N. & Acedo, Francisco J., 2021. "External supports, innovation efforts and productivity: Estimation of a CDM model for small firms in developing countries," Technological Forecasting and Social Change, Elsevier, vol. 173(C).
    2. repec:zbw:bofrdp:urn:nbn:fi:bof-201511261452 is not listed on IDEAS
    3. Mariotto, Carlotta & Verdier, Marianne, 2015. "Innovation and competition in Internet and mobile banking: an industrial organization perspective," Research Discussion Papers 23/2015, Bank of Finland.
    4. repec:bof:bofrdp:urn:nbn:fi:bof-201511261452 is not listed on IDEAS
    5. Marco Túlio Dinali Viglioni & Mozar José Brito & Cristina Lelis Leal Calegario, 2020. "Innovation and R&D in Latin America and the Caribbean countries: a systematic literature review," Scientometrics, Springer;Akadémiai Kiadó, vol. 125(3), pages 2131-2167, December.
    6. Seenaiah Kale & Badri Narayan Rath, 2018. "Does Innovation Enhance Productivity In Case Of Selected Indian Manufacturing Firms?," The Singapore Economic Review (SER), World Scientific Publishing Co. Pte. Ltd., vol. 64(05), pages 1225-1250, November.
    7. Sebastian Heinen, 2022. "Rwanda’s Agricultural Transformation Revisited: Stagnating Food Production, Systematic Overestimation, and a Flawed Performance Contract System," Journal of Development Studies, Taylor & Francis Journals, vol. 58(10), pages 2044-2064, October.
    8. Zahler, Andrés & Goya, Daniel & Caamaño, Matías, 2022. "The primacy of demand and financial obstacles in hindering innovation," Technological Forecasting and Social Change, Elsevier, vol. 174(C).
    9. repec:zbw:bofrdp:2015_023 is not listed on IDEAS
    10. Roth Cardoso, Hugo Henrique & Dantas Gonçalves, Adriana & Dambiski Gomes de Carvalho, Gustavo & Gomes de Carvalho, Hélio, 2020. "Evaluating innovation development among Brazilian micro and small businesses in view of management level: Insights from the local innovation agents program," Evaluation and Program Planning, Elsevier, vol. 80(C).
    11. Tarek Roshdy Gebba & Mohamed Gamal Aboelmaged, 2016. "Corporate Governance of UAE Financial Institutions: A Comparative Study between Conventional and Islamic Banks," Journal of Applied Finance & Banking, SCIENPRESS Ltd, vol. 6(5), pages 1-7.
    12. Giovanni Dosi & Andrea Roventini & Emmanuele Russo, 2020. "Public Policies And The Art Of Catching Up," Working Papers hal-03242369, HAL.
    13. Simplice A. Asongu & Nicholas M. Odhiambo, 2022. "The of role economic growth in modulating mobile connectivity dynamics for financial inclusion in developing countries," Working Papers 22/013, European Xtramile Centre of African Studies (EXCAS).
    14. Asongu, Simplice A. & Biekpe, Nicholas & Cassimon, Danny, 2021. "On the diffusion of mobile phone innovations for financial inclusion," Technology in Society, Elsevier, vol. 65(C).
    15. Broadberry, Stephen & Wallis, John, 2017. "Growing, Shrinking and Long Run Economic Performance: Historical Perspectives on Economic Development," CEPR Discussion Papers 11973, C.E.P.R. Discussion Papers.
    16. Asongu, Simplice A. & Biekpe, Nicholas & Cassimon, Danny, 2020. "Understanding the greater diffusion of mobile money innovations in Africa," Telecommunications Policy, Elsevier, vol. 44(8).
    17. Flood, Mark D. & Lemieux, Victoria L. & Varga, Margaret & William Wong, B.L., 2016. "The application of visual analytics to financial stability monitoring," Journal of Financial Stability, Elsevier, vol. 27(C), pages 180-197.
    18. Molyneaux, Lynette & Wagner, Liam & Foster, John, 2016. "Rural electrification in India: Galilee Basin coal versus decentralised renewable energy micro grids," Renewable Energy, Elsevier, vol. 89(C), pages 422-436.
    19. Maloney, William F. & Valencia Caicedo, Felipe, 2014. "Engineers, Innovative Capacity and Development in the Americas," IZA Discussion Papers 8271, Institute of Labor Economics (IZA).
    20. Leandro M. Meller, 2022. "Patent Length and Breadth as Policy Instruments: A Systematic Review of Recent Contributions to the Theory of Optimal Patent Design," Working Papers 192, Red Nacional de Investigadores en Economía (RedNIE).
    21. World Bank Group, 2015. "FYR Macedonia Public Expenditure Review," World Bank Publications - Reports 23808, The World Bank Group.
    22. Joel Kiplagat Tuwey & Vincent Ngeno, 2019. "Does CEO Traits Influence Innovation? Evidence from the Kenya Banking Sector," Journal of Accounting, Business and Finance Research, Scientific Publishing Institute, vol. 7(2), pages 98-106.
    23. Naude, Wim & Nagler, Paula, 2015. "Industrialisation, Innovation, Inclusion," MERIT Working Papers 2015-043, United Nations University - Maastricht Economic and Social Research Institute on Innovation and Technology (MERIT).

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:wdevel:v:125:y:2020:i:c:s0305750x19302670. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/worlddev .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.