Learning to innovate in urban informal enterprises of Ghana: Role of apprenticeship and formal interaction

Abstract

Informal enterprises learn how to produce goods and services through cumulative and diverse ways. However, there is limited empirical evidence on how learning processes influence the innovation of informal enterprises in Africa. This paper examines the effects of two learning processes (apprenticeship and ‘formal interactions’) on the product innovativeness of informal enterprises in Ghana. Employing unique survey data on 513 enterprises and the Type II Tobit model, our analyses revealed that apprenticeship, on the one hand, enhances the technological capability of enterprises leading to product innovativeness, while competitive formal interactions, on the other hand, provide important market feedback that enhances the innovativeness of enterprises. In addition, financially constrained informal enterprises that compete with formal enterprises in product markets performed poorly with their new products, compared with their counterparts who were not financially constrained. The paper concludes by discussing the policy implications of these findings.