Measuring Business and Enabling Environment Change in Market System Development

This post was co-authored by EcoVentures International and the Feed the Future Enabling Environment for Food Security project. An earlier version was originally published on Agrilinks.

Next month, donors and practitioners will convene at the global Market Systems Symposium 2019 in South Africa to discuss the latest in market system development practice and research. To gear up for the symposium, let’s take a closer look at recent research exploring the relationship between measuring business and enabling environment change in market system development. Stay tuned in the coming weeks, for more on Marketlinks from the Feed the Future Enabling Environment for Food Security project as we highlight key issues on this topic.

Recent Research in Measuring Outcomes and Impacts of Market System Development

In recent years, donors and practitioners working in value chain and market development for the benefit of the poor have made significant progress in developing a better contextual and conceptual understanding of the complex and dynamic nature of market systems and their enabling environment contexts. 

Within the U.S. Global Food Security Strategy (GFSS), market system strengthening serves to support a growing, resilient, competitive, inclusive, nutritious, and sustainable agriculture and food market system to, in turn, increase producers’ income through productivity and profitability improvements. In this light, USAID's Office of Market and Partnership Innovations funded a rapid review of the existing tools and learning around measuring the outcomes and impacts of market systems development. Conducted under the Feed the Future Enabling Environment for Food Security project with EcoVentures International, the review is being used to inform the GFSS learning agenda moving forward.

It appears that while there is progress in understanding systemic change in market development, there remains a lack of agreement and experience with how to measure it. There are, however, a variety of applicable measurement approaches and tools researchers and implementers are testing to inform the measurement of market systems change. Before diving into the indicators, let’s quickly recap a few helpful definitions.

Defining Market System Strengthening and Enabling Environment

As with the more general concept of systems change, market system strengthening can be defined relative to three distinct change domains, including outcomes/impacts, inclusion/actors, and conduct/governance. These three change domains are also related to the structure-conduct-performance (SCP) framework for analyzing firm and industry behavior.

• Outcomes/impacts: The performance of the market system, in terms of generating favorable outcomes and impacts, is the most commonly considered change domain within development programs. These are reflected in the intermediate outcomes and final impacts that are typically included in results frameworks.
• Inclusion/actors: An increase in inclusion, as reflected in the number of members of marginalized populations (smallholder farmers, women, and youth) who are included as productive actors in the market system, represents a change in the structure of the system. Another type of structural change includes new connections/relationships within the system.
• Conduct/governance: Changes in governance that affect conduct and behavior across the system represent the third, less frequently cited change domain. This would include analysis of changes in system governance, system health, market behavior, and informal social and business rules.

The enabling environment — often described as the laws, social and cultural norms, institutions, and procedures that guide behavior — is cross-cutting in relation to these domains in agricultural markets and the food systems. A facilitating enabling environment is inclusive of the informal and formal rules, codes of conduct, and the structures and institutions that support them. It also includes the important social and cultural norms and incentives that ultimately influence behavior, relationships, and decision-making across transactions in a system.

Exploring Indicators for Measuring Market System Strengthenin

The rapid review highlights several approaches for identifying indicators of systems change. Key discussions include:

• There is a move towards more systems-oriented indicators that focus on actors' key behavior changes within the system, such as adoption, imitation, adaptation, and innovation. Other indicator domains focus on changes in the structure of the network, such as new entrants and greater inclusion and/or on changes in the nature of relationships between actors in the system, such as changes in information flows, financial flows, churn rates, and trust.
• Two types of indicators are common across the different approaches. Buy-in indicators include adoption of new practices, initial and continued investment, and satisfaction. Imitation indicators include the copying of new practices and crowding in by competing and supporting businesses.
• A widely used framework for identifying indicators of market systems change is the Adopt-Adapt-Expand-Respond framework. Over time, the project-introduced change (innovation) is adopted by the actors in the system. Once established, there is “player-level institutionalization,” and the project no longer needs to provide support to system actors in the same way. Actors’ supportive behavior changes are adapted and sustained over time. Impact is expanded as more benefits accrue to more people, such as through new actors, imitation, rollout, and further innovations. As a result, market actors’ responses indicate additional changes in supporting functions, or rules in the enabling environment support increased adaptability.

• Another framework for identifying indicators of systemic changes defines two indicator domains, reflecting the depth and strength of changes. Greater depth relates to changes in the structure (network) and conduct (norms) of the market system.
• Another framework provides indicators of market systems health, including churn rates in business relationships, financial flows, information flows and rates of innovation in business models.

Deepening Discussions around PEA, Enabling Environment Reforms, and Market Systems at the Market Systems Symposium 2019

One track to be explored at the upcoming event will focus on how to integrate political economy analysis (PEA) and enabling environment reform into how USAID and others approach market systems. The Feed the Future Enabling Environment for Food Security project will host a pre-event training event titled, PEA: What it is and How Does it Support Market Systems Development? as well as support a PEA clinic during the symposium itself. Those interested in attending either or both events are encouraged to do so through the Market Systems Symposium 2019 conference site. Stay tuned for post-event resources and highlights.

Interested in learning more before then? Check out the M&E for Market Systems Literature Review and the following blog from the symposium last year, Five Market Systems Enabling Environment Recommendations.