LAUSR

Ethiopia has recently committed to economic transformation and industrialisation through a low-carbon development trajectory. Existing literature highlights innovation as a critical driver of industrialisation, and the need for ‘green’ innovations to improve resource productivity and reduce pollution. However, empirical studies investigating the nexus between green innovation systems and industrialisation in developing countries are limited. Based on nine semi-structured interviews and a survey of 117 firms, this article assesses sectoral systems of innovation in Ethiopia's cement, leather and textile sectors, with a view to understanding their functioning toward supporting green industrialisation. Results revealed low rates of product and process innovations among firms in Ethiopia. The main inhibitors of innovation are high costs of technology, inadequate finance and limited information. Improving competitiveness is the main driver of firms' innovation, while reducing environmental impacts and meeting environmental regulations were among the least important motivators. Moreover, interactions among firms, government and other actors encourage innovation. The study therefore suggests enhancing coordination among key actors, providing financial incentives for firms, and enforcing environmental regulations.