Dr. Elvis Avenyo

Innovation and firm performance in developing countries

Year: 2018

Pierre Mohnen & Maty Konte


Recent decades have seen a rise in optimism with regards to the sustainable economic prospects of sub-Saharan Africa through innovation. This thesis focuses on the empirical analyses of innovation activities of firms in sub-Saharan Africa, with specific emphasis on the innovation process, the market performance of new products and the labour market impact of new products. The novelty of the thesis comes from the duality perspective, where it departs from mainstream views of development economics, by considering innovations in both formal and informal firms. The results suggest that firm product innovations offer unique opportunities to resolve key socio-economic challenges, such as employment creation and competitiveness, Africa faces today. These results are valid irrespective of the registration status – formal and informal – of firms.

Chapter 2 investigates the impact of product innovations on total employment. The main finding is consistent with the stylised fact in the empirical literature, with product innovations having compensation impact on total employment. In extension to decent employment, we found that product innovation is biased towards temporary employment, though it creates both permanent and temporary jobs. Chapter 3 examines the relationship between informal competition and sales from innovative products introduced by formal firms. The results reveal a robust ‘Schumpeterian effect’ of informal competition on the market performance of product innovations. Besides, through indirect mechanism, firms with larger market share tend to have ‘escape-competition effects’. We argue that informal competition matters for the performance of product innovations, but only for formal firms that lack strategic collaborative ‘footholds’ in the informal economy. Chapter 4 describes the data collection procedure, followed by descriptive statistics of enterprise-level data collected in urban Ghana (Accra and Tema). The descriptive statistics indicate that innovations are pervasive in the informal economy of Ghana, with informal enterprises generating innovative ideas internally. Chapter 5 investigates the effects of learning processes –apprenticeship and formal interactions – on the innovation activities of informal enterprises in Ghana. The findings suggest that both apprenticeship and competitive formal interactions enhance product innovativeness.

Selected publications by Elvis Avenyo