Firm Characteristics, Financing and Firm Innovation in Africa

Abstract

The study employed firm level data from the World Bank’s Enterprise Survey Indicator Database to investigate firm characteristics associated with firm innovation in 32 African countries, for the period 2009 to 2018. We find that firm level innovation, including the introduction of significantly new products (H1), new or significantly improved methods of manufacturing products (New Technology) are strongly associated with external funding sources (funds from Banks and non-banking institutions). In addition, firm level characteristics such as firm age, female ownership, capacity utilization, educated labor force, exposure to competition is strongly associated with firm innovation. These findings are very important for countries in Africa (and other less-developed countries) who spend less on research and development due financing and structural constraints but want to accelerate economic growth and increased productivity.