Matching demand and supply in the Dutch agricultural knowledge infrastructure

De overgang naar een markt voor agrarisch onderzoek en kennisintensieve dienstverlening brengt verschillende uitdagingen met zich mee voor actoren in de agrarische kennisinfrastructuur, aan zowel de vraagkant (eindgebruikers van innovaties zoals boeren, en de overheid) en de aanbodzijde (aanbieders van onderzoek en kennisintensieve dienstverlening). Nieuwe organisatorische arrangementen proberen vraag en aanbod in de agrarische kennisinfrastructuur bij elkaar te brengen. Dit proefschrift gaat over dergelijke nieuwe organisatorische arrangementen.

Agricultural knowledge infrastructures worldwide are in transition as a result of reform measures affecting funding and governance structures and as a response to new heterogeneous demands from an agricultural sector that has become increasingly knowledge intensive.

This implies a shift from a supply-driven paradigm of service delivery towards one that is demand driven.

In The Netherlands, reform measures have resulted in full privatization of public agricultural research and extension establishments; this, in turn, has given rise to the emergence of a market in agricultural R & D and knowledge intensive business services (KIBS).

This market provides knowledge, embedded in services, for the support of operational decision making as well as support for agricultural innovation.

It forms part of a broader agricultural innovation system encompassing other elements important for agricultural innovation, such as 'hard institutions' (laws and legislation) and 'soft institutions' (norms, values, and incentive systems), and infrastructure in the form of roads and ICT, funding, etc.

The transfer to such a market in agricultural R & D and KIBS entails several demands and challenges for actors in the knowledge infrastructure on both the demand side (i.e.

End-users of innovations such as farmers, government) and the supply side (i.e.

Providers of R & D and KIBS).

These demands and challenges boil down to 1) adequately articulating demand prior to and during service provision (to guide knowledge and technology development), 2) developing adequate resources and competences for innovation (to implement new knowledge and technology), 3) dealing with market failures (such as information asymmetries, finding suitable cooperation partners, negative spillovers, substitution and exclusion risks), 4) financing the provision of agricultural R & D services and KIBS (i.e.

Undertaking procurement to find clients, and mobilizing funds to finance service provision), and 5) overcoming system failures (counteracting system closure and weakening system linkages).

To assist various actors in the knowledge infrastructure to cope with these challenges and demands, new organizational arrangements have emerged that help to articulate demand, fulfill brokerage roles to find suitable cooperation partners and form linkages with these, and help overcome cognitive, cultural, financial, legislative, and practical barriers during cooperation for innovation.

They thus attempt to match demand and supply in the agricultural knowledge infrastructure.

The thesis focuses on such new organizational arrangements, guided by three objectives, as described in Chapter 1: 1.

It seeks to document the operationalization of demand-driven R & D and KIBS provision (principal focus of Chapters 2 and 3).

2.

It seeks to explore and increase understanding of the functioning of new organizational arrangements in the agricultural knowledge infrastructure for matching demand for and supply of R & D and KIBS (principal focus of Chapters 4 and 5).

3.

It seeks to assess the embedding of new organizational arrangements in the agricultural knowledge infrastructure by exploring the positions and roles of the actors in the knowledge infrastructure vis-à-vis such new organizational arrangements, with an emphasis on end-users (i.e.

Farmers), R & D and KIBS providers, and the government (principal focus of Chapters 6 and 7).

Chapter 2 explores the operationalization of demand-driven KIBS service provision in relation to a public interest issue, using demand-side financing through a voucher scheme.

It discusses the case of the Nutrient Management Support Service (NMSS), a government-funded support service in The Netherlands designed to optimize the fit between the demand for and supply of 'agricultural knowledge products' that reduce nutrient emissions into the environment.

The activities of the support service were four-fold: (1) distributing vouchers to farmers, (2) establishing mechanisms for quality control, (3) facilitating the articulation of end-users' needs, and (4) improving market transparency.

The chapter analyzes the extent to which the NMSS has succeeded in supporting a demand-driven KIBS market for the provision of knowledge on nutrient management.

The results indicate that the financial incentive or subsidy that was given through the vouchers encouraged KIBS suppliers to inform their clients about the possibility of spending the voucher with them, rather than catalyzing an autonomous demand for KIBS provision on nutrient management issues.

Furthermore, creating market transparency by means of certification of 'knowledge products' did not induce a search for the best buy amongst farmers, as they often stuck with their regular advisor.

It appeared that it was the conflictive relationship between farmers and government regarding the nutrient management issue, as well as uncertainty about nutrient emissions regulation, that restrained farmers from becoming active in relation to nutrient management, rather than a lack of knowledge.

The project was characterized by limited flexibility to adapt to clients' (i.e.

Farmers) wishes, because it had to orient itself towards the wishes of the paymaster.

Although a market facilitator such as NMSS was appreciated in some respects, its project nature meant that it was inherently subject to 'funding impatience', as a result of which it could not establish itself long term within the agricultural knowledge infrastructure.

The chapter concludes that demand consists not only of an economic component (i.e.

Desire to purchase and purchasing power), but also of a substantial component that is about co-creation of the desired service.

The former was induced by the project, the latter not.

It also indicates that clearly displaying supply is not sufficient to facilitate a KIBS market, as this does not aid in selection.

Furthermore, it indicates that, when there is no or little private interest, using demand-side financing in a 'public funding-private delivery' KIBS scheme does not seem to be the most apt way to bring about knowledge exchange and learning on a public interest issue.

Chapter 3 presents a case study on the planning of R & D in a system of private collective funding.

The current emphasis on making agricultural R & D systems demand driven implies that R & D should be steered by the needs of end-users of innovations (i.e.

Farmers).

A principal challenge in this respect is to institutionalize demand-driven modes of working in agricultural R & D systems.

This chapter focuses on collective R & D funding by farmers who pay levies that are subsequently used to contract agricultural R & D.

In this system of 'contractual research planning, ' end-user steering and control of the R & D planning process is institutionalized.

Advocates of participatory R & D often see this as the maximum degree of end-user participation in R & D.

The purpose of the chapter is to critically examine such a system for operationalizing end-user demands in R & D planning, and to reveal possible weaknesses.

The outcomes suggest that, although end-users have the opportunity to raise issues that lead to R & D, researchers and R & D coordinators find that these are not articulated clearly enough to guide R & D planning, and end-users are not involved in any subsequent reformulation of the matter under consideration.

Queries are influenced by several actors in the R & D planning process in such a way that they do not adequately reflect farmers' innovation needs.

Furthermore, throughout the R & D planning and execution process, there seems to be limited interaction with end-users and other relevant stakeholders.

The chapter concludes by stating that, although end-users have the possibility of expressing their demands and of assigning budgets, there should be greater focus on raising the quality of demand articulation, and on involving end-users and other relevant stakeholders throughout the innovation process.

Also awareness needs to be raised regarding the position of R & D within the broader innovation system.

From an innovation systems perspective, it is argued that, in a situation where R & D provisioning has been privatized, R & D funding organizations should take the lead in adopting a more inclusive view on innovation.

This calls for institutional development in the funding organization.

Chapter 4 deals with a case study on a system of delegation of R & D planning and execution to networks, in which farmers, agri-industry, and civic advocacy organization representatives and government on the demand side, and researchers and consultants on the supply side, jointly engage in research planning.

An intermediary organization (Bioconnect) acts as a bridge at different interfaces in the system (e.g.

Between government and researchers, between researchers and end-users), at different stages of the R & D planning and execution process.

This system of delegation to networks is a new way for government to operationalize demand-driven R & D provision.

The purpose of this study, taking the perspective of the principal-agent relationship, was to reveal tensions that emerge in such a system of delegation at different stages of the R & D planning and execution process, i.e.

The policy arena, the selection arena, and the control arena.

Principals refer here to research commissioners, and researchers' agents.

The results indicate that in the policy arena there are tensions between the goals that the 'master principal' (government) and the 'delegated principal' (end-users) want to achieve, and that distilling an unequivocal end-user demand is difficult.

Furthermore, network participants must make a distinction, and strike a balance, between their personal return on their private investments and the private and collective returns for the broader constituency for which they also speak.

In the selection arena, information asymmetries among actors and the different actors' incompatible desired reporting formats make selection more complicated.

This raises the suggestion that actors that have more knowledge about the process can exercise more power.

In the control arena, the different actors' incompatible monitoring mechanisms make it more difficult for researchers to communicate about research.

The intermediary's attempt to manage all these different interests in these various areas, and to maintain its position as a neutral facilitator, is complicated by its resources dependencies and its organizational mission.

The conclusions indicate that in order to optimize delegation to networks the following is required: 1) capacity building amongst the actors involved to be able to effectively operate in the various arenas (i.e.

Reducing the information asymmetries), 2) synchronization of the different expectations of different actor groups involved in the network with regard to the goals at macro (government) and at micro (user) level and related monitoring output (i.e.

Pay sufficient attention to mutually understandable 'boundary objects'), and 3) awareness building about the private investments network participants have to make and the collective benefits these yield.

Chapter 5 focuses on the constraints and challenges experienced by the supply side and the demand side of the market for agricultural R & D and KIBS in effecting transactions and establishing the necessary relationships to engage in demand-driven innovation processes.

To mitigate these constraints and assist in tackling these challenges, a range of intermediary organizations has emerged to assist farmers to articulate demand, forge linkages with those that can provide innovation support services (i.e perform a bridging and brokerage function), and facilitate interaction between the actors involved in the innovation processes.

The chapter aims to give an overview of the different kinds of so-called innovation intermediaries that have emerged in The Netherlands, as a result of which five types are distinguished: innovation consultants aimed at individuals, innovation consultants aimed at collectives, brokerage organizations that forge peer (inter-firm) networks, systemic instruments that perform foresight tasks, and internet-based portals.

The chapter reports on the contributions and the tensions that are being experienced with regard to their functioning.

The chapter concludes with a discussion on several design issues in relation to these innovation intermediaries (i.e.

Their impartial position, their funding, their mandate, their position vis-à-vis other knowledge infrastructure actors, and the role of innovation policy with regard to their establishment) in which it is argued that the government could play an important role as a market facilitator, by funding certain functions of such innovation intermediaries.

Chapter 6 presents a case study on the embedding of an innovation intermediary who acts as a bridge between demand and supply in the agricultural knowledge infrastructure.

The chapter focuses on the relationships between a for-profit intermediary organization, InnoFac, and several parties for which it performs various bridging functions, i.e.

Coupling these parties in particular innovation processes and channeling and facilitating their subsequent interactions.

Many KIBS providers can be characterized as innovation intermediaries, but InnoFac is a 'pure' innovation intermediary (a facilitator of innovation) whereas other KIBS are also 'sources' or 'carriers' of innovation, i.e.

They also sell knowledge about the technical characteristics of the innovation in question.

This chapter focuses on relationships between a pure innovation intermediary and the supply side of the knowledge infrastructure, whereas in the broader literature the focus often is on interactions with end-users of knowledge and information.

The findings suggest that, although pure innovation intermediation is seen as beneficial, tensions emerge regarding the innovation intermediary's governance structure, the way it generates its revenues, and the different activities it performs.

One of these tensions is the emergence a 'social dilemma' situation, in which on the one hand the innovation intermediary is seen to make a contribution to the collective interest, but on the other hand stake-holding parties also want to satisfy their individual interests: this requires continuous balancing.

Another tension is the generation of revenues: a for-profit orientation appears to enhance accountability and efficiency, but also entails risks, including the fact that willingness-to-pay is affected by the intangibility of the activities of the innovation intermediary.

Furthermore, different parties with which the innovation intermediary is involved have different ideas about the required project size and the cost involved.

A last tension is the emergence of 'function ambiguity', i.e.

Parties with which the pure innovation intermediary interacts cannot estimate well how the activities of the pure innovation intermediary relate to their own activities, and to what extent they add value to innovation intermediation functions they themselves claim to perform.

The chapter indicates that a clearer delineation between the different activities undertaken by this pure intermediary has to be made in order to minimize competition with 'traditional' providers of R & D and knowledge intensive business services, so that its credibility and impartiality can be protected.

Also, an institutional learning process is required amongst parties on both the supply and the demand side of the market for R & D and KIBS to valuate the services of an innovation intermediary.

Furthermore, some tasks of innovation intermediaries appear to be best funded publicly to avoid impartiality, credibility and function conflicts, whereas others can possibly be funded privately.

Chapter 7 focuses on the peer (inter-firm) network brokerage organization, Dairy Farming Academy (DFA).

This study investigates the institutional setup of a network broker, and what is the effect of this setup on farmer networking and the existing business and innovation support system.

DFA aims to articulate knowledge needs of farmers and connect them with farmers with a similar interest and with other parties that can offer information on the particular topic.

To execute its activities, DFA mainly receives public funds from the Ministry of Agriculture, collective funds from the Dairy Commodity Board, and a small amount in user fees.

Results show that a demand-driven way of working may prevent policy-supported network brokers losing their neutrality in farmers' eyes because they are seen as a 'messenger' from government.

However, a broker nevertheless can be perceived as disruptive by business and innovation support service providers.

This dilemma prompts critical examination of the mandate of publicly funded network brokers.

Furthermore, the study reveals that there appears to be a funding paradox: whereas network brokers aim to reduce market and system failures in inter-firm networking, their financial longevity is threatened by the very same market and system failures linked to the nature of their activities, i.e.

Information asymmetries and difficulties in ex ante and ex post evaluation of service value.

Chapter 8 integrates the results of the various chapters into a general discussion, centered around the research objectives set out in Chapter 1, and provides the main conclusions of the thesis.

The main conclusions are the following: 1.

The term 'demand-driven' in relation to knowledge intensive service provision for the support of innovation processes is often taken as a conceptual unity, but needs to be seen as a multifaceted concept, which besides having an economic connotation (i.e.

Economic demand) has a strong connotation as regards the content of the service provision that it drives (i.e.

Substantive demand).

Demand for non-discrete knowledge intensive services is the result of an interactive process of co-creation and negotiation between demander and supplier, which in the case of multiple demanders is often oriented towards the demands of the financier, thus making service provision demand oriented (considering end-users but finally determined by the commissioner) rather than demand driven (by end-users).

Demand-driven service provision under a regime of 'public funding-private delivery' by means of demand-side financing (i.e.

Vouchers) appears to be less suitable to bring about KIBS provision on themes with a public interest character, but in which private interest is low or is not considered to be an issue.

4.

Demand for innovation support services is sometimes narrowed down too soon to demand for R & D and KIBS, whereas taking an innovation systems perspective calls for responding to various demands that need to be satisfied in order to successfully bring about innovation; this calls for other activities besides R & D and KIBS provision.

5.

Innovation intermediaries can play a useful role in articulating farmers' (end-users') demand for innovation to such an extent that it can be a starting point for network brokerage (i.e.

Scanning, scoping, filtering, and matchmaking).

They can play a further role in guiding the process of demand articulation and actual service delivery when there is interaction between farmers (and other stakeholders) and knowledge intensive service providers in their role of knowledge broker.

6.

In the Dutch agricultural sector, several types of innovation intermediaries have emerged at different system aggregation levels.

Their emergence is usually prompted by the prevailing policy context or by research and innovation opportunities/needs at a particular point in time, and they disappear for the same types of reason.

With regard to the Dutch agricultural sector, several experiments with innovation intermediaries have been conducted, in a context of change of the agricultural knowledge infrastructure and the relationship with end-users of innovation, and a search for an apt policy instrument for the support of agricultural innovation.

7.

Although not all types of innovation intermediaries can be characterized as purposefully set up 'systemic instruments' because they are rather targeted at facilitating innovation processes of individual farmers, they often do make a systemic contribution (i.e.

Articulating demand at higher system aggregation levels, informing policy agendas, fulfilling a liaison function between different innovation system and knowledge infrastructure components).

8.

In their role as (network and knowledge) brokers who serve, and are go-betweens for, several stake-holding parties, innovation intermediaries have to balance several interests concerning the content of the innovation process (i.e.

The nature and scope of the innovation), those to be involved in the innovation process, and the different interests of those involved in the innovation process.

The degree to which they succeed in satisfactorily balancing these different interests appears to have an influence on their perceived impartiality and credibility, and their resource position, and hence their longevity.

9.

The intangibility of the services performed by innovation intermediaries, and the difficulty of isolating their impact on the success (or failure) of the innovation process, has implications in terms of willingness-to-pay and justification for public spending.

Despite the difficulty of justifying public spending, in view of the difficulty of funding some of their services through the market and given the perceived positive effect of innovation intermediaries on innovation in their role as facilitators of innovation and systemic instruments, some form of continued public support from government appears essential.

Besides being a client of R & D and KIBS, and a market supervisor in the R & D and KIBS market, government is becoming a market facilitator.

10.

An inherent complication of innovation intermediation is that it can be characterized as constituting a dedicated organization (i.e.

A pure innovation intermediary), or be a function of an organization that also performs other activities.

Whereas some functions are better performed by a specialized, dedicated pure innovation intermediary, others can be performed as functions of regular KIBS providers.

Such a clear distinction appears hard to make, however, and is also dependent on the added value that a pure innovation intermediary is seen to have (i.e.

A 'make or buy' decision).

Valuation of the function and the added value of innovation intermediaries appears to require a learning process amongst farmers, R & D and KIBS providers, and government.

11.

Pure innovation intermediaries have a paradoxical goal: they emerge as a result of market and system failures, but by their functioning they resolve certain market and system failures and induce institutional learning that may eliminate the reasons for their existence.