Does governance quality promote innovation in sub-Saharan Africa? An empirical study across 37 countries

This inquiry examines the effect of quality of governance institutions on innovation in 37 sub-Saharan African countries for the period 1996–2016. The empirical analysis followed the instrumental variables regression technique. The motivation for using this estimation technique is to provide special focus to the issue of endogeneity by estimating IV general methods of moment’s model. The following general findings are presented. First, governance quality does, in fact, appear to promote innovativeness. Second, for all governance indicators, the effect of the quality of governance institutions follows two channels: directly and indirectly through its positive impact on human capital development. The empirical findings suggest that countries with better quality of governance infrastructure are able to promote innovation in better ways. That is, the results do support theories that argue in favour of the development of governance quality and the improvement of human capital infrastructure to foster the national innovation system. These results are found to be robust across alternative empirical specifications tested.