Rethinking foreign aid: Driving local innovation, R&D, and capacity building

Leonard Wantchekon

No 2315, Kiel Working Papers from Kiel Institute for the World Economy

Abstract: Research and development (R&D) is a central driver of long-term economic growth, technological progress, and institutional capacity. Yet many African countries remain marginal in the global knowledge economy, with limited investment in science, technology, and innovation (STI) and weak research ecosystems. This paper argues that the persistence of Africa's innovation deficit is partly rooted in the design of foreign aid and development policies, which have historically prioritized short-term service delivery over long-term investments in scientific capacity and technological capability. Drawing on economic theory, empirical evidence, and comparative case studies, the paper examines the role of R&D in structural transformation and assesses the structural barriers that limit innovation in Africa, including chronic underfunding, short-term aid cycles, misalignment between donor priorities and national strategies, and weak institutional systems. Evidence from countries such as Ethiopia, Brazil, and China demonstrates how sustained investment in research institutions, human capital, and international knowledge partnerships can generate significant productivity gains and technological upgrading. The paper concludes that development cooperation must shift toward innovation-driven growth. Strengthening universities, financing basic sciences, and fostering university-industry-government collaboration are essential steps for enabling African countries to transition from technology consumers to producers in the global knowledge economy.

Keywords: Foreign aid; development policy; knowledge economy; innovation (search for similar items in EconPapers)
JEL-codes: F35 O30 O32 (search for similar items in EconPapers)
Date: 2026
New Economics Papers: this item is included in nep-cse, nep-fdg, nep-knm and nep-sbm
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:ifwkwp:339614

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