The reasons why farmers are unable to harness the benefits embedded in technologies and take advantage of business opportunities in livestock sector in developing countries remain unresolved.

Drawing on insights from innovation systems approaches, this paper assesses innovation constraints, identifies the bottlenecks and missing links in dairy sector and suggests some instruments needed to address the constraints.

We find that missing actors, limited capacity of existing actors, inadequate interactions between actors and poor coordination of activities along dairy value chain have been the major reasons for low technology adoption and underdevelopment of the dairy sub-sector in developing countries.

Future research should pay attention to designing, prototyping and experimenting with alternative institutional arrangements that can effectively coordinate inputs, services, processes and outputs in livestock value chains.

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This paper was first presented at the Nile Basin Development Challenge Science meeting. The NBDC Science meeting was held on 9 and 10 July 2013 at the ILRI-Ethiopia campus, with the objectives to exchange experiences and research results across NBDC scientists involved in the NBDC projects and to discuss challenges and possible solutions.