Growing demand for livestock products, increased competition, from both developing and developed countries, and ever more sophisticated and changing sets of domestic and international trade norms and standards are putting increasing pressure on developing countries’ producers. In order to compete, cope and prosper under these evolving market conditions, livestock producers need to be able to constantly innovate. Moreover, to fully exploit the poverty reduction potential of these livestock sector trends, the capacity to respond and adapt to these changes needs to be enhanced in ways that both allow producers to innovate and at the same time safe-guards the livelihoods of poor people linked with the sector. This is not simply a question of ensuring that production and processing technology is made available through adequate livestock research, extension and other support services, but also includes the social and institutional arrangements required to mobilise different sorts of knowledge and support services in ways that create novelty on a continuous basis.

Innovation, as a driver of social and economic change, can be of particular significance in the rural sector of developing countries: It is where most of the poor live; it is where major environmental resources are located; and it is where the livelihoods of the most vulnerable communities are interlinked - for better or worse - to rapid technological and market changes that are transforming enterprises and services. Innovation, once thought of as a research driven process, is now recognised as an interactive process incorporating a much broader range of activities, actors, practices, policies and contexts. Together these different elements enable the creative use of both new and existing knowledge, information and technology. Since this involves the interaction of many actors with different and competing agendas, governance issues need to be addressed for innovation to lead socially desirable outcomes such as poverty reduction and environmental sustainability.

The growing diversification of rural livelihood options into non-farm activities and with the increasing interconnectedness of rural areas and activities to the global environment is radically changing rural economies. These changes in rural economies are also characterised by a growing interconnectedness and knowledge convergence among different areas of economic and social activity, for example, the interconnection among agriculture, food-processing and health, and the knowledge convergence arising from generic scientific knowledge such as gene technology, and generic process knowledge such as governance approaches . The unique characteristics of this new rural reality raise unexplored questions about the nature of rural innovation capacity and the challenges this brings to policy design and implementation. Such challenges concern a need to create capacity to:

	combine expertise from different science, technology and entrepreneurial domains (livestock, agriculture, health, communication, banking, etc.);
	respond to rapidly changing contexts (technical, market, policy, political and social); and
	recognise and address the challenges and opportunities emanating from the interconnectedness and knowledge convergence of different spheres of rural activity.

PPLPI is contributing to developing an understanding of these issues in collaboration with the United Nations University – Maastricht Economic and social Research and training centre on Innovation and Technology (UNU-MERIT), through a network of regional research and training hubs that facilitates discussions amongst scholars, policymakers, development investors and practitioners dealing with rural development.

The activities currently carried out by the PPLPI under the ‘Services, Institutional Change and Innovation Capacity’ theme focus specifically on: