A Comparative Study of Entrepreneurial Innovations in Formal and Informal Sectors

Abstract

The paper focuses on three issues- a) innovations are knowledge based resulting from the synthesis and application of the tacit and the coded knowledge; b) the role of entrepreneur (as knowledge manager) is important for exploiting the tacit knowledge and making use of the coded knowledge; and c) for the diffusion of innovations, variety of actors (as individuals or institutions) participate which leads to the formation of innovation networks. An attempt has been made to elaborate upon the above issues through two case studies from diverse sectors - formal and informal. One case study is related to the diffusion of new technology (plant biotechnology) at the field level. The process from technological innovation to diffusion level involved interaction amongst public and private institutions. The change was mainly based on the coded knowledge (the adoption of new technology) and in the process of change, the tacit knowledge played substantial role (in how to make use of the new technology) in accomplishing the technical change. In the second case of informal sector (the adoption of floriculture by traditional crop growing farmers), entrepreneurs' tacit knowledge initiated the change process. Tacit knowledge was used to fulfill customers needs and thus was used to capture the market. The new knowledge was created by combining the tacit one with the explicit and then applied meaningfully by the entrepreneurs so as to reap the economic benefits. The participation of different institutions in the later case was not so much differentiated and direct as it was in the first case. The role of the government, influenced by the circumstances, for the sustenance of the technical change was apparent.