Empirical Analysis of the Drivers of Innovation in Sub-Saharan Africa

Abstract

Technological innovation is the main driver stimulating labour productivity growth and development in the OECD countries and the industrialized world. However, advancement in technological innovation is lower in SSA than any other continent in the world perhaps resulting from the poor industrial development, poor human capital accumulation, unfriendly business environment and a host of other militating factors. The principal motive of this paper therefore set to examine the drivers of innovation specifically to sub-Saharan Africa. Panel dataset covering 30 selected SSA countries from 2011 to 2014 was used together with the modern and robust econometric estimating techniques, the Pooled OLS and the System GMM in estimating the empirical model. Results from the empirical estimation indicates that, institutional quality, human capital accumulation, expenditure allocated to R&D (percentage of GDP), domestic credits allocated to private sector (percentage of GDP), intensity of domestic trade and competition have a positive and significant effect on innovation advancement in SSA. However, the physical infrastructure deficit, collaboration between universities and industrial sector in terms of joint research, ease of starting new businesses have a negative and insignificant effect on innovation promotion in the region. FDI inflows to SSA have positive effect on innovation, however statistically insignificant. Based on the empirical results above, the study recommends that institutions of state such good governance, rule of law, contract enforcement, protection of intellectual property rights must be promoted to stimulate risky innovative investment. Additionally, there must be more focus on technical and vocational training to develop the creativity and ingenuity of the labour force, increase expenditure on R&D and physical infrastructure to reduce the operational and logistical constraints on firms. Also, adopting a well-functioning National Innovation Policy and finally, implementation of public procurement laws to boost competitive bidding to ensure competition among firms in the region.