Date of Award

Spring 5-2014

Embargo Period


Degree Type


Degree Name

Doctor of Philosophy (PhD)


Engineering and Public Policy


Francisco Veloso


This dissertation explores the conditions and the extent to which innovations, by both users and by firms, can originate in developing countries and diffuse to the rest of the world. The primary setting for these studies is the mobile financial services industry. Additionally, this dissertation looks at the overall significance of user innovation at the country level in order to discern drivers of user innovation diffusion. Finally, it investigates implications for innovation policy. These topics are addressed in three studies. The first study examines two main research questions. First, to what extent can users play a role in innovation in developing countries? Second, what is the global relevance and diffusion of innovations that originate in developing countries? This study finds that users pioneered over half of mobile financial services and that 85% of the services originated in developing countries. A comparison between all innovations in this industry shows that user innovations diffuse at more than double the rate of firm innovations. Additionally, three-quarters of the innovations that originated in developing countries diffused to OECD countries. This study also proposes a new methodology to analyze the sources of service innovations, which can be used in future research. The second study tries to answer the following research question: Under what conditions can industries emerge in the economic ‘South’? In addition, what firms are successful at entering in the South? This study uses a hand-collected dataset from the mobile financial services industry. We find that latent demand is an important driver for firm entry in developing countries, as is market share. Furthermore, previous entry in the industry leads to industry-specific knowledge accumulation, which spills over within firms and increases the likelihood of subsequent entry into other countries. The third study examines the characteristics of diffusion of user innovations using data from a large-scale national survey conducted in Portugal. It looks at differences between market and non-market channels of diffusion for professional-user innovators as well as end-user innovators. The main findings are that although most user innovators are willing to share their innovations for free, they do not actively inform other people about their solutions, which negatively affects diffusion. Furthermore, this research concludes that professional-user innovators are significantly more likely to protect their intellectual property than end-user innovators, which increases the likelihood of commercialization of the innovation.