The Effect on innovation of beginning informal : empirical evidence from Kenya Academic Article uri icon


  • The article analyzes firm-level data from a survey conducted in Kenya in 2013 referring to innovation activities in the 2010–12 period. It uses the data to study the impact on a firm's innovation decisions of the firm beginning operations as an informal firm, specifically on technological innovativeness, which comprises the introduction of new products and processes, marketing innovativeness, organizational innovativeness, and on the importance of obstacles to technological innovation. It finds past informality status to negatively affect technological innovativeness, with the effect persisting as we leave out relatively younger firms. It finds that the difference lies especially on process innovations. Regarding obstacles to innovation, it finds that beginning operations in the informal sector mostly affects a firm's perceptions on the need to innovate. We interpret this result as suggestive of the existence of severe informational disadvantages of firms that began informally and eventually transitioned to formality relative to firms that began in the formal sector.

publication date

  • June 2017