Innovation grants to smallholder farmers: Revisiting the key assumptions in the impact pathways Giel Ton a,⇑ , Laurens Klerkx b , Karin de Grip a , Marie-Luise Rau a a Agricultural Economics Research Institute, LEI Wageningen UR, P.O. Box 35, 6700 AA Wageningen, The Netherlands b Knowledge, Technology and Innovation Group, Wageningen University, The Netherlands article info Article history: Received 8 November 2013 Received in revised form 4 September 2014 Accepted 15 November 2014 Keywords: Rural development Impact evaluation Vouchers Challenge funds Farmer field schools. abstract Grant funds specifically targeted to smallholder farmers to facilitate innovation are a promising agricul- tural policy instrument. They stimulate smallholders to experiment with improved practices, and to engage with research, extension and business development services providers. However, evidence on impact and effectiveness of these grants is scarce. Partly, because attribution of changes in practices and performance to the grant alone is challenging, and the grant is often invested in innovation processes that benefitted from other support in the past. We discuss three modalities: vouchers, business develop- ment matching grants and farmer-driven innovation support funds. Our review points to an important and transversal outcome area of innovation grant systems: the creation of human and social capital to sustain creative thinking and innovative practices. Harmonising measurement on these outcomes could enhance the usefulness and comparability of impact studies and facilitate benchmarking of different pol- icy options for smallholder innovation. Ó 2014 Elsevier Ltd. All rights reserved. Introduction There is widespread consensus that users need to be endowed with decision-making authority to influence the research processes and other service provision (extension, business services, inputs) that support innovation (Douthwaite, 2002; Klerkx and Leeuwis, 2008; Klerkx et al., 2006; Neef and Neubert, 2011; Poulton et al., 2010). This makes it essential to have, besides financial support for the formal research, extension and business development organ- isations, research and extension approaches to support experimen- tation and innovation for and by smallholder agricultural producers (Hall et al., 2007; Wongtschowski et al., 2010). Innovation grant funds are receiving increasing recognition as a promising avenue for agricultural innovation (World Bank, 2012). Nevertheless, funds that are specifically targeted to smallholder farmers are quite rare. Grants for agricultural innovation are used to stimulate private sector and farmer engagement in activities related to technology generation, technology dissemination and overall innovation pro- cesses. The increased use of innovation grants in the last decade is a result of two tendencies that shape policies on agricultural extension and advisory services. Firstly, many countries have shifted to a more demand-led agricultural research system, in which users of research have a voice in determining research and innovation priorities or even decision-making authority (Klerkx and Leeuwis, 2009; Neef and Neubert, 2011). Simultaneously, also extension and business development support systems (including input supply) are moving towards demand-driven systems (Kilelu et al., 2011; Klerkx et al., 2006; Minh et al., 2014). Secondly, there is growing awareness that agricultural development is not only driven by technology produced by agricultural research but also encompasses organisational and institutional change (Hounkonnou et al., 2012; Klerkx and Nettle, 2013). Agricultural innovation is, therefore, not only about adopting new technologies; it also requires a balance among new technical practices and alter- native ways of organising, for example, markets, labour, land tenure and distribution of benefits (Adjei-Nsiah et al., 2008; Dormon et al., 2004; Pamuk et al., 2014). Agricultural innovation is a co-evolutionary process, i.e. combined technological, social, economic and institutional change (Kilelu et al., 2013), which may be both driven by top-down interventions, and bottom-up farmer’s grassroots activities (Smith et al., 2014). The process of obtaining and using the grants stimulates smallholders to be more pro-active and critical towards research and extension providers instead of being passive recipients of top-down technological rec- ipes (Heemskerk and Wennink, 2005; Rivera, 2000). A key premise is that the separation of the funding of the research, extension or business service provision from the provisioning of the research would make service provision more demand-driven. Also, because, in a market setting, several providers may compete for the http://dx.doi.org/10.1016/j.foodpol.2014.11.002 0306-9192/Ó 2014 Elsevier Ltd. All rights reserved. ⇑ Corresponding author. E-mail address: giel.ton@wur.nl (G. Ton). Food Policy 51 (2015) 9–23 Contents lists available at ScienceDirect Food Policy journal homepage: www.elsevier.com/locate/foodpol