Multiple Paths to Firm Innovation in Sub-Saharan Africa: How informal institutions matter

Abstract

Although innovation studies in developing countries acknowledge the importance of resources for firm innovation, their emphasis tends to be on bottlenecks created by resource constraints and institutional weaknesses. We address this shortcoming by exploring the relationship among firm resources and formal and informal institutions leading to innovation in these settings. By adopting a crisp-set qualitative comparative analysis of firms in sub-Saharan Africa, we confirm the thesis that informal institutions substitute underdeveloped formal institutions and in combination with firm-level resources afford firm innovation. More importantly, we find that informal institutions also complement more developed formal institutions in the presence or absence of high levels of firm resources or accommodate them in the presence of high levels of firm resources to support firm innovation. Our findings point to multiple paths that firms can take to be innovative that best fit their existing institutional context.