TITLE:
Financing Firm Innovation in Africa
AUTHORS:
Michael Asiedu, Sanogo Boubacar, Gabriel Kyeremeh
KEYWORDS:
Firm Financing, Innovation, R & D, New Technology, New-Product Innovation
JOURNAL NAME:
Modern Economy,
Vol.12 No.9,
September
22,
2021
ABSTRACT: This study contributes to the existing literature on
innovation by examining how manufacturing firms in Africa fund innovation
activities. This study specifically seeks to identify whether innovative
companies exhibit financing patterns distinct from those of non-innovative
ones. Besides, this study seeks to gauge the association between innovation and
firm features, such as ISO certification, firm age, exporter firms, firm size,
internal funding, top female manager, top managers’ experience, bank financing,
obstacle to access to finance, financial constraints, government ownership, and
foreign ownership, among others. This study finds that the main drivers of firm
innovation in Africa are ISO certification, firm age, firms communicating with
customers through emails, and websites, exporter firms, firm size, internal
funding, top female manager, top manager’s experience, bank financing, trade
credit, firm location, and location size. We also found that only 19.6% of the
sampled firms have ISO certification within the last three years. As captured
by the innovation index, a summary of the level of innovation among firms shows
that only 31.7% of the firms fall within high innovation. The study, therefore,
recommends that to salvage the low levels of firm innovation among African
firms, it will be prudent to 1) increase R & D spending (the ratio of R
& D expenditure to GDP), 2) attract and incentivize highly qualified
researchers into public, and privative enterprises, not only into higher
institutions of learning, and 3) incentivize and promote patent activities.