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The effect on innovation of beginning informal: Empirical evidence from Kenya

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  • Mendi, Pedro
  • Mudida, Robert

Abstract

We analyze firm-level data from a survey conducted in Kenya in 2013 referring to innovation activities in the 2010–12 period. We use the data to study the impact on a firm's innovation decisions of the firm beginning operations as an informal firm, specifically on technological innovativeness, which comprises the introduction of new products and processes, marketing innovativeness, organizational innovativeness, and on the importance of obstacles to technological innovation. We find past informality status to negatively affect technological innovativeness, with the effect persisting as we leave out relatively younger firms. We find that the difference lies especially on process innovations. Regarding obstacles to innovation, we find that beginning operations in the informal sector mostly affects a firm's perceptions on the need to innovate. We interpret this result as suggestive of the existence of severe informational disadvantages of firms that began informally and eventually transitioned to formality relative to firms that began in the formal sector.

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  • Mendi, Pedro & Mudida, Robert, 2018. "The effect on innovation of beginning informal: Empirical evidence from Kenya," Technological Forecasting and Social Change, Elsevier, vol. 131(C), pages 326-335.
    • Handle: RePEc:eee:tefoso:v:131:y:2018:i:c:p:326-335
    DOI: 10.1016/j.techfore.2017.06.002
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    2. Olushina O Awe & Robert Mudida & Luis A. Gil‐Alana, 2021. "Comparative analysis of economic growth in Nigeria and Kenya: A fractional integration approach," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 26(1), pages 1197-1205, January.
    3. Colovic, Ana & Misganaw, Bisrat A. & Assefa, Dawit Z., 2022. "Liability of informality and firm participation in global value chains," Journal of World Business, Elsevier, vol. 57(1).
    4. Sana Ullah & Colin C. Williams & Babur Wasim Arif, 2019. "The Impacts Of Informality On Enterprise Innovation, Survival And Performance: Some Evidence From Pakistan," Journal of Developmental Entrepreneurship (JDE), World Scientific Publishing Co. Pte. Ltd., vol. 24(03), pages 1-19, September.
    5. Radicic, Dragana & Petković, Saša, 2023. "Impact of digitalization on technological innovations in small and medium-sized enterprises (SMEs)," Technological Forecasting and Social Change, Elsevier, vol. 191(C).
    6. Assefa, Dawit Z. & Liao, Ching T. & Misganaw, Bisrat A., 2022. "Unpacking the negative impact of initial informality on innovation: The mediating roles of investments in R&D and employee training," Technovation, Elsevier, vol. 114(C).
    7. Sharma, Gautam & Dahlstrand, Åsa Lindholm, 2023. "Innovations, informality, and the global south: A thematic analysis of past research and future directions," Technology in Society, Elsevier, vol. 75(C).

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    Innovation; Informality;

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