Institutions, resources and innovation in East Africa: A firm level approach

TLDR

The study investigates how firm‑level resources and regional institutional quality jointly influence innovation in East Africa, hypothesizing that institutions moderate the resource‑innovation relationship. Using firm‑level data from the World Bank Enterprise Survey and Innovation Follow‑up Survey for Kenya, Tanzania, and Uganda, the authors model the moderating effect of institutions on the conversion of R&D, human capital, and managerial experience into innovation with a clustered robust‑error logistic regression. Results show that firm‑level resource effects on innovation differ across institutional contexts, with higher institutional quality strengthening the positive impact of resources.

Abstract

This study examines how firm-level resources interact with regional institutional quality to explain innovation in East Africa. We hypothesize that the institutional environment within which the firm operates moderates the effect of firm-level resources on innovative output. We examine the moderating role of institutions with regards to the transformation of firm-level resources including internal research and development, human capital and managerial experience into innovative output using firm-level data from the World Bank Enterprise Survey and the Innovation Follow-up Survey for three countries in East Africa including Kenya, Tanzania and Uganda. We test our hypotheses using a clustered robust standard errors logistic model. We find that the effects of firm-level resources vary depending on the institutional environment and that regional institutional quality positively moderates the effects of the firm-level resources.