Innovation and exporting: the case of mediation effects in Sub-Saharan Africa

ABSTRACT

This study investigates the mechanisms accounting for the two-way relationship between innovation and exporting in sub-Saharan Africa. We hypothesise that the relation between innovation and subsequent exporting is mediated by market investment. We also hypothesise that customer feedback mediates the relation between exporting and subsequent innovation. We test these hypotheses using repeated cross-sectional data from the 2006/07 and 2013 World Bank Enterprise Surveys. We also use data from the 2013 Innovation Follow-up survey. We indeed find that market investment mediates the effect of innovation on subsequent exporting and that customer feedback mediates the effect of exporting on subsequent innovation. We conclude that innovation policies aimed at fostering novel product innovation may be important for creating a new market space on the export market. Furthermore, investment in information and communications technology infrastructure is likely to enhance faster response to market needs.

KEYWORDS:

• Exporting
• innovation
• customer feedback
• market investment
• sub-Saharan Africa

Disclosure statement

No potential conflict of interest was reported by the authors.

Notes

¹ The name M-PESA is a combination of an abbreviation and a Swahili word. ‘M’ stands for ‘Mobile’ while PESA, is a Swahili word for money. Hence, M-PESA stands for mobile money.

² M-PESA has been less successful in other countries relative to Kenya. This has been attributed to pervasive financial exclusion that made M-PESA a viable option for a majority of Kenyans. In addition, M-PESA conformed to culturally accepted forms of traditional exchange in Kenya that involved the transfer of money through third parties.

³ Kikoy, also known as Kikoi, is a traditional Kenyan handwoven cotton wrap. The Kikoy fabric has distinctive vibrant colour combinations and designs.

⁴ The subjective definition of what an innovation is may partly account for such high levels of self-reported innovation in developing countries especially since innovation is likely to be ‘more incremental and less radical’ (Cirera and Muzi 2016).

⁵ Cohen’s (1988) guidelines for effects size are $.1$ for a small effect, $.3$ for a medium effect, and $.5$ for a large effect. Kenny (2016) suggests that since the indirect effect is computed as a product of two effects, $r$ should be squared. This makes a small effect size $.01,$ a medium effect size $.09,$ and a large effect size$.25$. Additionally, where the independent variable is dichotomous, path $a^{\prime }s$ correlation is replaced with Cohen’s $d$. The effect size is then computed as $dr$. This suggests that a small effect size is $.02$, a medium effect size is $.15$, and a large effect size is $.40.$

Additional information

Funding

This work was supported by the Department for International Development, UK Government [P05639].