Enhancing Ethiopia’s Agro-Industrial Competitiveness: The Role of Sectoral Innovation Systems and Integrated Agro Industrial Parks in Global Value Chain Integration

Abstract

This dissertation examines Ethiopia’s agro-industrial competitiveness by analyzing Sectoral Innovation Systems (SIS) that enhance Integrated Agro-Industrial Parks (IAIPs) and their integration into Global Value Chains (GVCs). Despite their central role in Ethiopia’s industrial strategy, IAIPs confront structural bottlenecks, including fragmented institutional coordination, underdeveloped innovation ecosystems, and restrictive trade policies, limiting their potential for inclusive transformation. The study employs a novel Integrated Mixed Methods Framework, aligning sub-thematic inquiry with policy objectives. It combines PLS SEM and qualitative data from interviews, focus groups, and field observations in Yirgalem and Bulbula IAIPs. This approach validates an analytical framework informed by SIS theory and GVC governance, focusing on: (1) governance frameworks, (2) sustainability-driven innovation, (3) agricultural innovation drivers, and (4) product differentiation and trade policy in global competitiveness. Empirical findings reveal complex, sometimes counterintuitive relationships. Institutional frameworks (β = –0.451, p < 0.01) and innovation ecosystems (β = –0.744, p < 0.01) negatively impact competitiveness, due to bureaucratic rigidity and poor market responsiveness. However, institutional quality enhances stakeholder coordination (β = 0.583) and innovation ecosystem development (β =0.717). Sustainability practices are key drivers of innovation (β = 0.504, p < 0.001), facilitating market integration (β = 0.422)—the strongest predictor of GVC governance (β = 0.589). Mediation analysis shows the sequential influence: sustainability → innovation → market integration → GVC governance. Key drivers of agricultural innovation are institutional support (β = 0.555), networking (β = 0.352), and policy frameworks (β = 0.209). Technology has a non-significant direct effect (β = 0.098), emphasizing the need for supportive institutional conditions. Networking significantly mediates the relationship between institutions and innovation (β = 0.195, p < 0.001). Innovation positively affects product differentiation (β = 0.299) but does not significantly boost competitiveness (β = 0.058). Trade policy negatively impacts competitiveness (β = –0.318), indicating misalignment with global market integration. This dissertation contributes by contextualizing SIS and GVC frameworks in a low-income, resource-constrained setting. It introduces a replicable method for innovation system diagnostics and offers policy recommendations focused on institutional reform, innovation policy alignment, trade facilitation, academia–industry linkages, and future research directions. The research concludes that agro-industrial competitiveness in Ethiopia is best achieved through the strategic integration of innovation, sustainability, and coordinated governance mechanisms.