African Journal of Science, Technology, Innovation and

Development

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Natural resource endowment and firm-level

innovation in Africa: Evidence from cross-country
analysis

Abdi Yuya Ahmad, Babikigalaga Denis Akouwerabou & Yehualashet Demeke

Lakew

To cite this article: Abdi Yuya Ahmad, Babikigalaga Denis Akouwerabou & Yehualashet Demeke
Lakew (2019): Natural resource endowment and firm-level innovation in Africa: Evidence from
cross-country analysis, African Journal of Science, Technology, Innovation and Development, DOI:
10.1080/20421338.2018.1550926

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African Journal of Science, Technology, Innovation and Development, 2018
https://doi.org/10.1080/20421338.2018.1550926
© 2018 African Journal of Science, Technology, Innovation and Development

Natural resource endowment and firm-level innovation in Africa: Evidence from cross-country
analysis
Abdi Yuya Ahmad1*, Babikigalaga Denis Akouwerabou2 and Yehualashet Demeke Lakew3
1
Department of Economics, Adama Science and Technology University, Adama, Ethiopia
2
Department of Economics, University Ouaga II, Ouagadougou, Burkina Faso
3
Department of Management, Arsi University, Asela, Ethiopia
*Corresponding author email: yuyabdi@gmail.com

This paper investigates the impact of a country’s natural resource endowment on the innovation propensity of firms in
Africa. It was expected that firms in resource-rich countries have less incentive to innovate than firms in resource-poor
countries due to the destructive effects of large resource rents on supportive institutions and political order. The data
used for the empirical analysis were obtained from the World Bank’s enterprise surveys global development indicators
and the African Economic Outlook reports. The hierarchical nature of the analysis called for a multilevel mixed effect
modelling strategy. Results suggest that firms in resource-rich countries are not necessarily less innovative than firms in
resource-poor countries. High natural resource endowment appeared to reduce firm-level innovation only if associated
with poor institutional and technological capabilities. The innovativeness of firms in resource-rich sub-Saharan Africa
countries was found to be lower than that of firms in North African countries. The negative effect of poor institutional
quality appeared to be dampened among firms with better innovation capabilities. The findings imply that building
effective institutional environments and enhancing firm-level innovative efforts would help mitigate the ‘resource curse’
which, in turn, is dictated by the resulting types of political settlements in resource-rich African countries.

Keywords: firms, innovation, Africa, country, natural resource, institution

Introduction linked to innovation systems (Lundvall 2011). These

The largest proportion of differences between developed
and least developed countries (LDCs) has been attributed
to total factor productivity (TFP) which mainly depends
on innovation and technological capabilities (Rodrik, Sub-
ramanian, and Trebbi 2004). The innovativeness of a
country, in turn, depends on various factors relating to
its institutional and social capabilities (Freeman 2011;
Lundvall 2011). Plenty of literature associates the poor
growth performance of Africa’s economy with natural
resource endowment, conflict, locational disadvantages
in terms of access to the global market and advanced tech-
nologies (Pinkovskiy and Sala-i-Martin 2010), colonial
legacies, ethnic divisions, initial conditions, and economic
policies (Fosu 2008). Particularly, the fact that Africa’s
export has been the least diversified of all developing
countries and its excessive dependence on primary com-
modities (Asche, Neuerburg, and Menegatti 2012) have
remained among the major concerns for both researchers
and policymakers. McMillan and Rodrik (2011) indicated
that African countries whose export revenue largely
depends on natural resources are less likely to succeed
in spurring productivity enhancing structural change. For
instance, Nigeria and Zambia have experienced negative
growth while Ghana, Ethiopia and Malawi have registered
relatively better growth (McMillan and Rodrik 2011).
The empirical regularity that resource abundance
could affect economic growth through its effect on
social and institutional capabilities (UNDP 2006) and
the fact that innovation capacities had a pivotal role in
the growth dynamics of successful developing countries
(OECD 2012) suggest the potential linkages between
natural resource endowment and innovation. Resource1
intensity can influence the likelihood of firms to innovate
via its effect on national framework conditions (UN 2016)
relationships also imply the possibility of explaining the
‘resource curse’ phenomenon from micro-perspectives
rather than pursuing macroeconomic approaches applying
growth regressions. Given the theoretical framework that
puts firms at the centre of learning and innovation (Lund-
vall 2011) and the fact that innovation plays key roles in
economic growth, generating micro-level explanations
for the ‘resource curse’ thesis, would produce important
policy inputs for Africa.
Inspired by the above ground, this study proposed to
examine the links between natural resource endowment
and the innovation propensities of firms in a non-
resource sector. Apart from filling the underlying gap
in the literature, the research also aimed to lay the
ground for similar subsequent studies. Three related
questions were set to be answered in this paper. 1) Are
firms2 in resource-rich countries less innovative than
those in resource-poor countries? What transmission
mechanisms exist if there is any effect running from
resource endowment (macro-level) to innovation
(micro-level)? 2) How important is institutional environ-
ment in determining the incentives for and hence out-
comes of firm-level innovative efforts? 3) Are there
country-wise variations in the outcomes of firms’
efforts to introduce new or significantly modified pro-
ducts or processes? Seeking answers to these questions,
the study aimed at suggesting measures that would help
tackle the likelihood of ‘resource curse’ in Africa which
is among the continent’s top priority agendas in view of
the increasing trend of new resource discoveries and the
growth potentials underlying natural resources.
Unlike earlier studies, this paper gives new evidence
and a theoretical framework that can help explain the
‘resource curse’ and its ramifications at the micro-level.

African Journal of Science, Technology, Innovation and Development is co-published by NISC Pty (Ltd) and Informa Limited (trading as Taylor & Francis Group)
2 Ahmad, Akouwerabou and Lakew
The expectation that firm-level innovation is lower in all
resource-rich African economies has not been supported
by the finding. The effects appeared to be different
between countries in the sub-Sahara Africa (SSA) and
those in North Africa (MENA). Resource endowment
appeared to inhibit innovation in SSA countries and in
cases where there are poor political conditions.
However, innovation is not hampered by poor political
situations among firms with better innovative efforts.
The findings suggest that getting the political machine
right and using resource revenues for building innovation
capabilities are crucial if Africa is to overcome the
‘resource curse’ and achieve the required types of struc-
tural change.
The remaining part of the paper begins with the next
section that presents a brief literature review and the
hypotheses formulated based on the major research ques-
tions. The section thereafter presents some stylized facts
on descriptive insights about the manifestation of the
‘resource curse’ phenomenon followed by the underpin-
ning analytical framework of the study. The section that
then follows discusses the data and the methodology uti-
lized to test the hypotheses. The penultimate section con-
stitutes discussions on the results of the econometric
analyses. The final section gives conclusions on the
main findings and recommendations.
Literature review and hypotheses
There is a broad consensus that improvement in the quality
of labour, capital accumulation and technical change
explains differences in economic growth and develop-
ment. The deeper question has been about why some
countries perform better than others in terms of skills
development, stocks of capital and innovation. One of
the answers to this question concentrates on geography
(including natural resources and ecological factors) and
trade (Sachs and Warner 2001). Some countries have geo-
graphical advantages in terms of their natural resource
stocks and proximity to international trade or technologi-
cally frontier countries. Countries with good stock of min-
erals and fuel and/or those with better geographical
proximity are expected to have higher growth potential
than those that do not.
Some economists argue that differences between
countries in improving the quality of their labour and sti-
mulating capital accumulation and innovation relates to
the functioning of their institutional set-ups. Institutions
are considered as the most important (in fact, the only
really important) root factor of development (Rodrik,
Subramanian, and Trebbi 2004). The question again is
why have some countries’ institutions proven to be
more effective than others’? One of the arguments
given in the ‘resource curse’ literature is that resource-
rich countries face distinct challenges in terms of
unemployment and weak production linkages among
economic sectors (WEF 2017); have lower levels of
overall development, higher incidences of child malnu-
trition, lower educational outcomes, and shorter life
expectancy (Page 2005); and poor governance (Collier
and O’Connell 2008).
Two opposing arguments exist regarding the links
between natural resource endowment and economic
growth. The first constitutes a view that countries with
high natural resources enjoy better growth opportunities
than resource-poor countries. This has evolved from the
experiences of industrialized economies including the
USA and Norway. Secondly, the experiences and
success of newly industrializing Asian economies led to
emergence of a ‘resource curse’ phenomenon in which
economies with many natural resources are believed to
perform more poorly than countries with fewer natural
resources (Sachs and Warner 1997, 2001; UNDP 2006).
Different theoretical bases have been used to explain the
phenomenon among which the structuralist’s view, the
‘Dutch Disease’ thesis and institutional economics are
the most common. Structural economists argue that
resource abundance slows growth owing to lower terms
of exchange between primary and manufactured goods,
volatility of commodity prices, and the weak linkages
between natural-resource and other economic sectors. Pro-
ponents of the ‘Dutch Disease’ thesis argue that high
inflow of foreign currencies following resource booms
and high returns to labour and other factors in the extrac-
tive sector hinder industrialization in relation to manufac-
tured goods’ decreased competitiveness fuelled by
exchange rate appreciations and misallocation of pro-
ductive resources. Institutional economists associate the
‘resource curse’ phenomena with the growth-inhibiting
effect of high transaction costs due to increased incidences
of rent seeking in resource-rich countries (Robinson,
Torvik, and Verdier 2006). Besides, resource rents would
inhibit growth through rendering different enabling insti-
tutions ineffective (Bulte, Damania, and Deacon 2005;
Isham et al. 2005) and directing entrepreneurial efforts
towards less productive activities (Mehlum, Moene, and
Torvik 2006).
Nevertheless, in their extensive review of the litera-
ture Torres, Afonso, and Soares (2013) found that
whether natural resources can be a ‘curse’ or a ‘blessing’
depends on various factors and the effects are more of
indirect than direct. Given the strong theoretical and
empirical bases on the crucial role of innovation for
aggregate productivity and the strong roles of insti-
tutional arrangements in innovation systems, explaining
the ‘resource curse’ thesis along this line would be
more plausible. Well-functioning institutions are impera-
tive for entrepreneurial ability and innovation (Tebaldi
and Elmslie 2013), accumulation of physical and
human capital (Rodrik, Subramanian, and Trebbi
2004), and adoption and creation of better technologies
(Loayza, Oviedo, and Serven 2005), and determine the
outcomes of firms’ productivity enhancing inputs such
as R&D (Goedhuys and Srholec 2015) all of which are
crucial for innovation. Sachs and Warner (2001) argued
that entrepreneurship and innovative activities are low
in resource-rich countries as high returns in the resource
sectors divert factors away from non-resource sectors.
This implies that firms in resource-rich countries are
less likely to innovate than firms in resource-poor
countries. The following hypothesis (1a) was set to
verify this relationship:
 African Journal of Science, Technology, Innovation and Development 3

. Hypothesis 1a: The higher a country’s natural resource own innovative efforts would also depend on country-
endowment, the lower is the innovation propensity of specific conditions. Countries differ in terms of conditions
firms in the country such political system, levels of development, stocks of
social and human capital, comparative advantages, levels
However, the above theoretical and empirical bases
of infrastructure, and openness to trade. These conditions
suggest that hypothesis (1a) can hold water only con-
dictate each country’s policy formulation and implemen-
ditionally. The assumption is that natural resource inten-
tation capabilities, industrial capabilities as well as firm-
sity may jeopardize innovation through affecting other
level incentives for doing business, entrepreneurship and
mediating factors. Natural resource wealth appeared to
innovation. Therefore, similar innovation inputs and
be a ‘curse’ when associated with low-quality institutions
efforts by firms in different countries would not produce
(Brunnschweiler 2008). Similarly, Daniele (2011) found
similar outcomes. Accordingly, hypotheses 2a and 2b
that the effect of natural resources on a country’s human
were set to be tested:
and economic development depends on the country’s
specific conditions in terms of the political and insti- . Hypothesis 2a: Poor institutional quality associates with
tutional features. lower firm-level innovation propensity due to lower
Barma et al. (2012) also noted that the quality of a incentives or efforts to innovative
country’s institutions is central in the resource paradox . Hypothesis 2b: The outcomes of firms’ innovative
and institutional quality in turn depends on levels of econ- efforts3 vary with country specific conditions
omic development. They referred to the simple empirical
Some stylized facts that would help justify the hypoth-
fact, often ascribed as a major dimension of the resource
eses and the analytical framework of the study are pre-
curse, that resource dependent countries possess poorer
sented in the following section.
institutional quality than they should, given their income
levels. Holding gross domestic product (GDP) constant,
Stylized facts and the analytical framework of the
resource-dependent countries perform less well in govern-
study
ance indicators demonstrating the institutional dimension
Some stylized facts on the manifestation of resource
of the ‘resource curse’ (Barma et al. 2012). Robinson,
curse
Torvik, and Verdier (2006) and Mehlum, Moene, and
In view of the limited empirical evidence regarding the
Torvik (2006) argue that countries with accountability
links between natural resource abundance and innovation
and state-competence promoting institutions will benefit
capability at micro- and macroeconomic levels, this
from resource abundance while those without such attri-
section presents some stylized facts pertaining to the
butes would face a ‘resource curse’. Specific to Africa,
implications of the ‘resource curse’ phenomena in
controlling corruption and high regulatory quality were
Africa. This was done by categorizing countries into
found to stimulate innovation (Oluwatobi et al. 2015).
resource-rich and resource-poor based on AfDB et al.
Therefore, conditions linked to institutional qualities con-
(2016). The focus was to illustrate the differences
stitute the transmission channel through which revenues
between these categories in terms of their manufacturing
from extractive sectors would affect innovations in the
and innovation capabilities. Given the pivotal role of tech-
manufacturing and service sectors. This suggests the
nological progress for long-term sustained development
need to modify hypothesis (1a) by (1b):
and the perception that the rate of technological change
. Hypothesis 1b: The higher the institutional quality of a may be more dynamic in manufacture or services sectors
country the lower is the probability that natural resource than in resource-dependent activities, African policy-
endowment reduces the innovation propensity of firms in makers aspire to diversify their economies and decrease
the country their natural resource dependencies (WEF 2017). Empiri-
cal evidence from Africa indicates the dominance of a
Furthermore, the transmission mechanism would
counterproductive impact of natural resource endowment
follow other channels than those that would be captured
on manufacturing and service sectors. Thus, looking at
by a single institutional indicator, embedded in broader
manufacturing capabilities would shed some light on the
characteristics such as initial conditions and geography.
impact of resource intensity on the development of other
For instance, countries in the MENA region have
non-resource sectors. The patterns of national innovation
medium to high human development indices (HDI)
capabilities of resource-rich and non-resource rich
while most countries in SSA have low HDI (AfDB et al.
countries would also indicate the potential channels
2016), not to mention other idiosyncrasies, country-wise.
through which resource endowment would affect firm-
Accordingly, it could be the case that the impacts of
level innovation performances. The selected indicators
resource intensity on firm-level innovation may be differ-
are shown below graphically (Figures 1–4).
ent between countries in the SSA and those in MENA.
Figure 1 displays differences in the manufacturing per-
Given this, the following was hypothesized:
formances measured in terms of manufacturing value
. Hypothesis 1c: The effects of natural resource intensity added (MVA) as a per cent of gross domestic product
on firm-level innovation are different for countries in (GDP) and the share of manufacturing export in total mer-
the SSA and those in the MENA region chandize export (MEX). Panel (a) shows that the average
MVA of resource-poor countries was above that of
Apart from the potential variations on the effects of resource-rich countries over the 2000–2016 period.
natural resource on innovation, the effectiveness of firms However, the gap decreased due to the declining trend
4 Ahmad, Akouwerabou and Lakew
Figure 1: Resource endowment and manufacturing performance.
Source: Global Development Indicators database.
of MVA of resource-poor countries from about 16% in
2002 to below 12% after 2012. The MVA of resource-
rich countries was between 8% and 10% over the same
period.
Similar to the MVA, the average MEX of resource-
poor countries [Figure 1(b)] was above the MEX of
resource-rich countries. The average MEX of resource-
poor countries was above 25% while that of resource-
rich countries remained below 25%. Between 2000 and
2006, MEX exhibited a declining trend in both country
groups. After 2007, however, there appeared to be asym-
metric movement whereby the MEX of resource-poor
countries was increasing while that of resource-rich
countries was declining until 2009. MEX’s convergence
over the 2015–2016 period may be attributed to improve-
ment in the strategies of one or more countries in the
resource-rich countries which can only be traced through
examining each country’s specific performance.
Figure 2 uncovers the importance of disaggregating
African countries into more homogeneous groups so
that averages make better sense. According to Asche,
Figure 2 : Resource endowment and manufacturing performance by region.
Source: Computed from Global development Indicators database.
Neuerburg, and Menegatti (2012) countries in the North-
ern African region (henceforth MENA) have shown
better performances in their manufacturing and export
diversification than those in the sub-Saharan Africa
(SSA) regions with the exception of South Africa. On
this account, Figure 2 was prepared to depict if the same
differences would prevail between the two regions in
terms of average MVA and MEX as well as the trends
of average percentage shares of natural resource revenues
(NRR) in the GDPs of the two regions.
Comparing panel (a) and panel (b) reveals that the
average MEX of countries in the MENA region ranged
between 32% and 50% while that of the SSA was far
lower (20–25%). The average MVA of countries in the
MENA region also exceeded (15%) that of countries in
the SSA (10%). The other interesting aspect of Figure 2
is the observed differences in the potential relationships
between natural resource and manufacturing performances
between the two regions. The figure shows that with the
exception of years before 2003 and after 2011, the
average NRR of countries in the MENA region was
 African Journal of Science, Technology, Innovation and Development 5
Figure 3: Number of Scientific and technical journal articles (in hundreds).
Source: WEF (2017).
above 15% of their GDP while that of countries in the SSA
fell below 15% except over the 2007–2008 and 2011–
2012 periods. After 2008, the NRR of MENA countries
declined at a higher rate than the decline observed in
SSA. This may be linked to the political turmoil countries
in the region experienced.
Regarding the relationship between manufacturing
performance and natural resource, average MEX seems
to be correlated negatively with average NRR in both
MENA and SSA as their respective graphs tended to
move in opposite direction. However, the gap between
the two indicators was wider in case of the MENA
countries. Coupled with this, their higher export diversifi-
cation depicts the underlying advancement in terms of
their relative technological and innovation capabilities.
As one of the alternative measures of national technologi-
cal capability, it may be useful to see the trends of the
number of scientific and technical journals (NSTJ) by
the two African regions as depicted in Figure 3.
The left panel (a) of Figure 3 shows the total NSTJ
by a few countries in the MENA region was, almost,
equal to but growing faster than that of all countries in
the SSA. The comparison is clearer when the average
NSTJ is used as indicated in panel (b). It is apparent
that the average NSTJ of a country in the MENA
reached over 4000 per annum in 2016 from its 2003
status of about 1000. On the other hand, the average
NSTJ of a country in SSA stalled with the highest
being about 500 per annum. This would decrease even
further if South Africa were excluded from the group.
This fact suggests MENA countries have greater
human and institutional capabilities which are important
for innovation.
Nevertheless, high resource endowment appears to be
associated with low quality institution and low innovation
in the African context.4 Figure 4(a) depicts that the quality
of institutions in resource-rich countries is lower than that
of the resource-poor groups. Similarly, Figure 4(b) indi-
cates that resource-poor countries have better innovation
capability than their resource-rich counterparts.
The two panels of the figure (3.4) together suggest a
direct relationship between institutional quality and inno-
vation in line with the theoretical and empirical evidences.
Being resource rich may not necessarily discourage the
innovation propensities of firms in a given country. It is
more likely to have a negative effect on firm-level inno-
vation if accompanied by lower institutional quality.
Therefore, if a resource-rich country manages to build an
effective institutional environment, there would be favour-
able condition for innovation in the country. Given this,
the analytical framework underpinning the possible
micro manifestation of the ‘resource-curse’, as drawn
from the literature and stylized facts, is given below.
Analytical framework
Figure 5 depicts the analytical framework of the study
driven from two strands of literature. The first class is lit-
eratures on the political economy of natural resource and
while the second relates to the innovation system and
innovation capability literatures. Whether natural resource
can be a ‘curse’ to a given country depends on its impact
on the country’s growth enabling conditions. It can be a
‘blessing’, rather, if the country makes proper use of
resource revenues in creating growth-enabling conditions
through building infrastructure, effective institutions and
technological capabilities which in turn strongly depend
on what Khan (2010) calls ‘political settlement’.
This implies that the economic impact of high resource
intensity may be good or bad depending on its effect on the
resulting type of political settlement. According to Bates
(2008) mineral and petroleum production can affect politi-
cal order in two different ways. The first is through affect-
ing income distribution either between the centre and the
periphery or between resource-rich and resource-poor
regions. The second channel relates to the impact of
resource rents in shaping the behaviour of political elites
in a political system. Similarly, Nigeria’s oil resource has
become a ‘curse’ as it turned the county’s political order
and institutions a convenient apparatus that better served
6 Ahmad, Akouwerabou and Lakew
Figure 4: Institutional quality and Innovation by resource endowment.
Source: Computed from Global competitiveness database.
politicians’ personal ends than the national interest (Olar-
inmoye 2008).
With the exception of Botswana, Africa’s resource-
rich countries, in general, have experienced the worst
economic situations (Collier and O’Connell 2008). They
have been exposed to increased incidences of conflict
and rent-seeking behaviours, clientelism in fiscal policies
and political institutions (Page 2005); poverty, environ-
mental degradation, human rights abuses, authoritarianism
Figure 5. The analytical framework.
Source: Authors’ articulation based on Khan (2010).
(Duruigbo 2014); and different growth inhibiting syn-
dromes (Fosu 2008). Focusing on the roles of history
and political interaction within and outside a country (Aye-
lazuno 2014) would be important as problems emanating
from historical or colonial legacies, social structures and
ethnic diversities have contributed to the malaise of
Africa’s politics and economy (Page 2005). Thus, the
economic implication of Africa’s natural resource endow-
ment is more tenable if analyzed from political economy
 African Journal of Science, Technology, Innovation and Development 7
perspective and hence the underpinning analytical frame-
work is depicted in Figure 5.
The top left box of Figure 5 shows that all other geo-
graphical location and historical legacies would affect
different national capabilities and political settlement.
Political settlement is pivotal the effectiveness of national
policies as it determines how different actors at macro-,
meso- and micro-levels are coordinated (Khan 2010). At
the macro-level, the type of political settlement of a given
country dictates important conditions such as the quality
of institutions, macroeconomic stability, infrastructure,
social and technological capabilities, and the policy
making capacity. These conditions can also determine
firm-level and sectoral performances through their effects
on firm-level and sectoral characteristics respectively.
Actors at meso-level refer to sectoral characteristics such
as sector-level policy, institutions, comparative advantage,
technology, industrial structure, and learning opportunity
which are not immune from the prevailing type of political
settlement. These sectoral behaviours can constrain and
limit performance of firms through affecting learning capa-
bilities and various operational conducts (Malerba 2002).
At micro-level, political settlement determines not
only the type of firms to be selected for reaping the
benefits of policy rents, it also affects the ex-post charac-
teristics of the firms including their innovative behaviour.
According to Khan (2010) a ‘Capitalist’ political settle-
ment supports value adding firms which are characterized
by dynamic learning and innovation capabilities while
‘clientlist’ type of political settlement often rewards rent-
seeking firms rather than value-adding capitalists
through compromising the effectiveness of formal insti-
tutions. The latter characterizes widespread failure of
developing countries to catch up with advanced countries
owing to the failure of their institutions to induce pro-
ductivity growth in learning industries as the institutions
are unable to manage rents and create conditions for
rapid learning (Khan and Blankenburg 2009).
Generally, the potential impacts of a country’s natural
resource endowment on the innovation of firms would
transmit through affecting the country’s political settle-
ment. The resulting type of political settlement in turn dic-
tates different national and institutional capabilities which
are pivotal to the nature and interactions of actors in inno-
vation systems as well as the risk taking, learning, and inno-
vation behaviours of business entities (Oyelaran-Oyeyinka
and Sampath 2007). Therefore, modelling the manifes-
tation of a ‘resource curse’ phenomenon at micro-level
entails accounting for different national, sectoral, and
firm-level characteristics. However, full-fledged empirical
translation of the analytical framework is difficult due to
lack of appropriate theory, data and complexity of inter-
actions. Given these constraints, this research can be the
first of its kind in Africa to examine the microeconomic
implication of the ‘resource curse’ paradox. The data and
methodology used in the study are presented below.
Data and methodology
The data
The micro data utilized in this study constitute 18,928
observations drawn from the World Bank’s Enterprise
Surveys (ES) conducted in 30 different African countries
(Table 1) over 2011–2017 periods. The country-year com-
bination that generated the total sample was for the simple
reason that only countries with data over this period were
included, since the ES data collected before 2011 lacked
uniformity and the required innovation variables for the
study. Enterprise surveys since 2011 have been conducted
using more standardized questionnaires. The question-
naires also included an innovation module constituting
questions about product innovation, process innovation,
organizational innovation, whether a firm has spent on
Research and Development (R&D), and so on. The ES
data also constitute important variables such as different
firm characteristics, performance measures, markets, sec-
toral characteristics, and general business environment.
The data were collected by interviewing managers of
enterprises operating in manufacturing, trade and other
service sectors including construction. The country-year
sample size (Table A1) ranges from 150 to 2897 with
Egypt contributing the largest followed by Nigeria. Ethio-
pia and Tanzania’s data, respectively, constitute 1492 and
1237 observations pooled from two different years.
Countries were grouped into resource-rich and resource-
poor based on African Economic Outlook’s (AfDB et al.
2016) definition which relied on each country’s 2010 per
capita USD value of natural resource production.
The empirical model: Multi-level mixed effect logistic
regression
In estimating a model that predicts the likelihood that a
firm will innovate as a function of firm-level and
country level variables, one would use ordinary logistic
regression with or without country dummies and multile-
vel mixed-effect logistic model. Using ordinary logit
including country dummies with other explanatory vari-
ables is preferred to the one without country dummy as
it fails to capture country fixed effects. However, using
multilevel modelling is far better than the two as it
allows fitting firm-level regression while controlling any
country specific systematic unexplained variation in a
single statistical equation (Gelman 2006). Multilevel
model disentangles the unexplained variance in a
regression attributed to differences among groups from
that of differences among individuals within a group.
Besides, it allows measuring the relative sizes and
effects of country level variables on individual character-
istics and outcomes by adding interaction terms (Goldstein
2011). Multilevel modelling is applied on hierarchically
clustered data at two or more levels.
This paper applied a two-level model with firms and
countries taking the first and the second levels respect-
ively. In line with the analytical framework, a country’s
natural resource endowment would affect innovation at
the firm-level through its effect on political settlement
which in turn dictates institutions and other capabilities
determining innovation. Therefore, the total effects of
firm-level, sectoral, and national characteristics constitute
both fixed and random components which would vary
with countries depending on their respective institutional
and national technological capabilities. Up on assuming
8 Ahmad, Akouwerabou and Lakew

Table 1: Definitions of variables.

Innov: dummy for innovation, assuming value ‘1’ if a firm performs new or significantly improved product/process or service during
three years before the survey and ‘0’ otherwise
lnage: the natural logarithm of number of years since a firm started operation
exptopm: measures experiences of top managers computed as the natural logarithm of the total number of years a manager has spent in a
specific sector
frmsize: represents firm size computed as the natural logarithm of the total number of permanent full-time employees of a firm
private: dummy for private ownership of a firm, taking value ‘1’ if a private owner’s share in a firm’s total paid-up capital exceeds 50%
and ‘0’ otherwise
foreign: dummy for foreign ownership of a firm, assuming value ‘1’ if a foreign owner’s share in a firm’s total paid-up capital is non-zero
and ‘0’ otherwise
training: dummy for training, assuming value ‘1’ if a firm offered formal training to its permanent full-time employees during years
before the survey reference
buscity: dummy for main business city, taking value ‘1’ if a firm is located in a country’s main business city and ‘0’ otherwise
RDS: dummy for R&D expenditure, assuming value ‘1’ if a firm has R&D spending over the last there years before survey. It is used as a
measure of innovation capability on the ground that firms with positive R&D spending also have the materials and expertise required for
innovation
export: Dummy for exporters taking value ‘1’ if a firm sells its product in foreign market(s) and ‘0’ otherwise
sector: stands for three separate dummies for manufacturing, trade and other service sectors
polhar: political hardening (a composite index representing institutional quality of a country computed based on observed events) taken
from African Economic Outlook (2016). Values range between 1 and 7 with the highest showing poor institutional quality
resd: dummy for resource-rich countries taking value ‘1’ if a country’s minerals, metals and oil production accounted more than 30% of
the country’s GDP in 2010 [following AfDB et al. (2016)]
SSA: dummy for SSA, taking value ‘1’ if a country is located in SSA and ‘0’ otherwise (or MENA)

random intercepts, the following was estimated:
Innovij = h0 + h1 frmsizeij + h2 lnageij + h3 trainingij
+ h4 exptopmij + h5 Foreignij + h6 buscityij
+ h7 RDSij + h8 sector + h9 exportij
+ h10 privatedij + h11 resd + h12 SSA
+ h13 polhar + uj + eij
(1)
where j = 1, … ,30 represent countries, i = 1, … , nj firms
in country j, and uj is the random intercept, and e
denotes error term.
If one or more covariates are assumed to vary across
upper level clusters, a model with both random intercepts
and slopes would be estimated. In this study, random vari-
ation was assumed in terms of firm-level innovative capa-
bilities only and the resulting model was specified as:
Innovij = h0 + h1 frmsizeij + h2 lnageij + h3 trainingij
+ h4 exptopmij + h5 Foreignij + h6 buscityij
+ h7 RDSij + h8 sector + h9 exportij + h10 privatedij
+ h11 resd + h12 SSA+ h13 polhar +RDSij uj + eij
(2)
Relevant interaction effects were also included in both
equations to test the extended hypotheses corresponding
to the possible differential impacts of resource endowment
by regions and country specific institutional environments.
Definitions of the major variables are given in Table 1.
Results and discussion
The above stylized facts suggested the potential relation-
ship between a country’s natural resources, institutions,
and innovation. This section presents results of the econo-
metric analyses corresponding to the micro implications of
the relationships. The major objective was to see if there is
any connection between a country’s natural resource
endowment and the probabilities of firms in the country’s
non-resource sectors. Before presenting the regression
results, it would be useful to give a descriptive view of
the proportion of firms that undertook product and
process innovations (Appendix Table A2) in each
country. Among the 30 countries in the sample, Kenya,
Namibia, Uganda, Rwanda, Zimbabwe, Sudan, Maurita-
nia, Malawi, Zambia, Tanzania and Ghana respectively
are the top 10 countries with over 50% of firms reported
to have introduced new product or service. Rwandese
firms have the highest process innovation (0.71) whereas
firms in Lesotho have the least process innovation
(0.06). Over 50% of the firms in Rwanda, Uganda,
Kenya, Namibia, Zimbabwe, Tanzania, Mauritania,
CAR, Ghana, and Malawi have undertaken process inno-
vation. Lesotho has the fewest innovative firms in terms of
both product and process.
The main regression results are presented in Table 2
under seven columns (M1-M7). M1, M2, M3, and M6
display results obtained from different specifications of
product innovation equation while M4, M5 and M7 con-
stitute estimates of process innovation. Estimates in M1-
M5 show results of random intercept specification while
M6 and M7 were obtained from random intercept and
slope specification (equation 2) with unstructured var-
iances that allow correlation between variances of the
random intercepts and slopes. The likelihood ratio tests
beneath the columns suggest using multilevel mixed
effect logit estimations is better than applying ordinary
logit. Besides, the fact that the standard deviations of the
random intercepts and coefficients became more than
twice of their respective standard errors confirm the appro-
priateness of the model specifications.
Results show some differences in the effects of firm-
level controls on product and process innovation. Age
and private ownership of firms have positive significant,
Table 2: Results of multi-level mixed effect logit.

M1 M2 M3 M4 M5 M6 M7
lnage 1.049**[0.025] 1.051**[0.025] 1.053**[0.025] 0.994[0.025] 0.995[0.025] 1.050**[0.025] 0.995[0.025]
frmsize 1.107***[0.018] 1.106***[0.018] 1.104***[0.018] 1.080***[0.018] 1.078***[0.018] 1.103***[0.018] 1.080***[0.018]
training 1.873***[0.079] 1.875***[0.079] 1.874***[0.079] 1.885***[0.081] 1.884***[0.081] 1.878***[0.079] 1.888***[0.081]
exptopm 1.008[0.007] 1.008[0.007] 1.008[0.006] 1.036***[0.008] 1.035***[0.008] 1.009[0.006] 1.036***[0.008]
export 1.054[0.049] 1.056[0.049] 1.041[0.048] 1.087*[0.052] 1.067[0.051] 1.045[0.048] 1.069[0.051]
privated 1.108*[0.066] 1.111*[0.066] 1.106**[0.065] 0.944[0.058] 0.941[0.058] 1.104*[0.065] 0.942[0.058]
RDS 3.423***[0.166] 3.421***[0.166] 2.657***[0.171] 3.915***[0.191] 2.855***[0.185] 2.552***[0.302] 2.902***[0.302]
foreign 1.220**[0.096] 1.217**[0.096] 1.218**[0.096] 0.978[0.082] 0.983[0.082] 1.215**[0.095] 0.981[0.083]
buscity 1.077**[0.040] 1.074*[0.040] 1.081**[0.041] 1.097**[0.043] 1.105**[0.044] 1.084**[0.041] 1.110***[0.044]
resd 1.500**[0.267] 3.697***[1.332] 4.342***[2.337] 1.053[0.187] 1.324[0.807] 5.312***[3.176] 1.275[0.793]
polhar 0.914**[0.040] 0.965[0.041] 0.960[0.047] 0.926*[0.040] 0.918[0.050] 0.966[0.047] 0.915[0.053]

African Journal of Science, Technology, Innovation and Development 9

SSA 1.600*[0.405] 2.721***[0.789] 2.858***[0.885] 2.003***[0.501] 2.206**[0.770] 2.947***[0.901] 2.168**[0.812]
resdxSSA 0.308***[0.130] 0.287***[0.131] 0.832[0.430] 0.274***[0.122] 0.854[0.438]
polharxRDS 1.102***[0.019] 1.129***[0.019] 1.116***[0.039] 1.122***[0.034]
resdxpolhar 0.951[0.111] 0.957[0.126] 0.881[0.139] 0.962[0.143]
Retail Service 0.873***[0.033] 0.872***[0.033] 0.876***[0.033] 0.637***[0.025] 0.640***[0.025] 0.878***[0.033] 0.641***[0.025]
other service 0.759***[0.060] 0.765***[0.060] 0.762***[0.060] 0.699***[0.060] 0.695***[0.060] 0.763***[0.060] 0.694***[0.060]
_cons 0.240***[0.078] 0.145***[0.050] 0.147***[0.052] 0.521**[0.171] 0.508*[0.202] 0.145***[0.051] 0.503*[0.207]
Random-effects Parameters Estimates
sd(_cons) 0.419[0.066] 0.354[0.061] 0.355[0.061] 0.411[0.068] 0.404[0.067] 0.342[0.060] 0.408[0.070]
sd(RDS) 0.363[0.079] 0.29[0.070]
corr(RDS_cons) 0.136[0.492] −0.207[0.350]
No. of obs 16843 16843 16843 16812 16812 16843 16812
No. of groups 30 30 30 30 30 30 30
Wald chi2 1316*** 1334*** 1368*** 1619*** 1678*** 693*** 973***
LR test vs. logi. 256*** 124*** 128*** 204*** 199*** 152*** 213***
NB: year dummies included in all models; and *,**,*** indicate significances at 10%, 5%, 1% respectively. Values in parentheses are standard errors.
10 Ahmad, Akouwerabou and Lakew
albeit marginally, effects on product innovation while
tending to have negative effects, though insignificant, on
process innovation. RDS, training, and firm size appear
to have positive and strongly significant effects. The mag-
nitude of the effect is the highest in RDS followed by train-
ing. The innovation propensities of firms with R&D
spending exceeded those of firms without R&D by
about 2.6–4-fold. Providing formal training to permanent
employees was also proved to raise innovation propensity
by about twofold. Firms located in a country’s main
business city (buscity) appeared to be more innovative
than those in other locations. The probability of product
innovation is significantly higher among foreign firms
than domestic firms. Neither export participation
(export) nor top managers’ experiences (exptopm) have
a significant effect on product innovation while the later
appears to have a significant effect on process innovation.
As expected, service firms have significantly lower inno-
vation than manufacturing in terms of both product and
process.
Turning to the main variables of interest, M1 and M4
display results estimated for product and process inno-
vations, respectively, with the aim of testing hypothesis
1a up on controlling for the confounding effects of politi-
cal conditions and regional differences while excluding
interaction terms. The results failed to support the hypoth-
esized negative relationship between resource endowment
and innovation as the odds ratio (1.5) of resource dummy
(resd) appeared to be strongly significant (5% level). This
means that the innovation propensity of firms in resource-
rich countries exceeded that of their resource-poor com-
parators by about 50%. However, the same did not seem
to hold in the case of process innovation. Of the two
country-level potential confounders, poor political situ-
ation (high polhar) was found to significantly reduce the
likelihoods of both product and process innovations.
Firms in SSA countries appeared to have significantly
higher probabilities to innovate than firms in the MENA
region. The respective probabilities in the former countries
were found to be 1.6 and 2.0 times higher than the later in
terms of product and process innovations.
Evidence from the ‘resource curse’ literature suggests
that high natural resource ownership does not necessarily
lead to poor economic outcomes. Likewise, the effects of
natural resources can affect firm-level innovation though
indirectly through various institutions and actors in inno-
vation systems which ultimately determine innovation
capabilities at both sector and firm-levels. On account of
this, the relationships between natural resource and firm-
level innovation were expected to vary across countries
depending on their respective capabilities and institutions.
This called for estimating models with interaction
terms. Accordingly, random intercept models with inter-
actions were estimated and the results are reported in
Table 2, columns M3 and M5. The interaction between
political hardening (proxy for institutional quality) and
resource endowment (resd×polhar) was included to test
hypothesis (1b). The results showed that high political
hardening turned the effect of natural resource on inno-
vation from positive to negative, although apparently stat-
istically insignificant. Other unknown reasons might have
caused changes in the political order. Alternatively, it
could mean that there are other important measures of
institution which are strongly linked to the likelihood of
‘resource curse’.
The other important interaction effect was the one
between SSA and resd (resd×SSA) with the aim of
testing the third sub-hypothesis (hypothesis 1c). The
interaction was assumed to capture broader factors
embedded in regional differences in relation to the poten-
tial effects of natural resource on firm-level innovation.
The estimation results are presented in columns M2
and M3 of Table 2. As can be seen from the results,
the odds ratios corresponding to the interaction term
turned out to be significantly small fractions (0.308
and 0.287) at less than 1% level of significance. This
suggests that the innovation propensity of firms in a
resource-abundant SSA country is significantly lower
than that of a resource-rich MENA country. It implies
that resource-rich SSA countries are more prone to the
‘resource curse’ than those in MENA region as lower
firm-level innovation in the former can be associated
with lower prospects to sustainable growth. This is in
line with the stylized facts presented in the third section
of this paper which indicate relatively higher technological
and manufacturing capabilities in MENA countries than in
SSA countries. However, due to the inherent nature of the
quantitative approach applied in this paper, the detailed
transmission mechanism that links regional affiliation of
a country and national technological capability to firm-
level innovation remains to be a ‘black box’.
Nevertheless, the analytical framework (Figure 5)
suggests that the effects of any factor at the national
and sector levels on innovation translate through chan-
ging firm-level innovation capabilities or efforts. One
way to check this channel is to see if a country’s political
situation determines the effects of firm-level capabilities
on innovation. Accordingly, hypothesis 2a was tested by
interacting polhar (proxy for institution) with RDS
(proxy for innovation capability). Pertaining to this, the
estimated odds ratios appeared to be significantly
higher than 1 (1.102 in M3 and 1.129 in M5) confirming
the hypothesis. This corresponds to a positive and sig-
nificant interaction between polhar and RDS suggesting
that the negative effect of poor political situation on
innovation is dampened in firms with higher innovative
capabilities. Given this, it was expected that the effect
would vary by country giving rise to a random slope
model (equation 2) which also constitutes one way of
testing hypothesis 2b.
The random slope models were estimated with and
without interaction terms but only results with interactions
are reported in Table 2 (M6 and M7). The likelihood ration
(LR) tests on the assumption that random intercept models
are nested in their respective random intercept and random
slope counterparts strongly supported hypothesis 2b. Cor-
responding to models without interaction terms, compar-
ing M1 and M4 against their respective random slope
counterparts (not reported) produced LR test statistics of
23.45 and 14.45 respectively. Similarly, the LR tests on
the assumptions that M3 is nested in M6 and M5 is
nested in M7 respectively generated the LR test statistics
 African Journal of Science, Technology, Innovation and Development 11
of 48.81 and 56.75. All the test statistics were found to be
significant at less than 1% level suggesting the superiority
of random slope model and hence random variations in the
effects of innovative efforts by country.
Using the random slope estimation results, schematic
views of country-wise variations in the effects of innovative
capability (in odds ratios) on product and process inno-
vations are presented respectively in the left and right
panels of Figure 6. Countries in the uppermost parts of
the two panels are those with the highest outcomes while
those at the bottom are those in which innovative efforts
have the least effect. Differences in the total effects are
due to differences in the country specific random com-
ponents since the fixed effects are equal for all countries.
Given the effects are described in terms of odds ratios,
values below one (1) in all cases indicate the dominance
of negative random effects over the positive fixed effects.
The total effects of R&D on product innovation range
between 0.25 (CAR) and 2.5 (Sudan). This means that
R&D spending in CAR decreases the innovation propen-
sities of firms rather than increasing it. In contrast, R&D
spending by Sudanese firms increases the innovation pro-
pensities of firms by about 2.5-fold. Similarly, conditions
in other countries such as South Sudan, Tunisia, Zambia,
Morocco, Lesotho, Swaziland and Djibouti also do not
seem to reward innovation. Apart from these, the remain-
ing countries have positive reward for innovation efforts
but with different levels as can be seen from the figure.
Similar country-wise variations also exist in the effects
of firms’ innovative efforts on process innovation. The
right-hand panel of Figure 5.1 shows that firms in
Nigeria harvest the highest benefit out of their innovative
efforts while those in Swaziland benefit the least. With the
exception of the bottom seven, R&D spending increases
firms’ innovation in the rest of the countries though to
different extents.
Figure 6. The total effects of R&D on firm-level innovations by country.
Robustness check
Use of different measures of resource endowment would
generate different results. For instance, Daniele (2011)
found different results in the relationship between
natural resource and human development up on using
commodity export and sub-soil asset measures of
natural resources. Specifically, the impact of metals
and ore exports had negative effect on human develop-
ment. On the other hand, the impact of sub-soil assets
measure on human development appeared to be positive.
To deal with such variation, IMF’s resource wise-
country grouping (cited in AfDB et al. 2016) was used
which, unlike the grouping based on countries’ sub-
soil assets estimates, brought Egypt and Ghana under
the resource-rich group.
Given the statistical superiority of the random slope
specifications, estimations for the robustness check were
also made accordingly and the results are presented in
Appendix Table A3. The overall estimates show simi-
larities with the results in Table 2. Comparing results in
column 2 and 3 of Table A3 against M6 and M7 in
Table 2, almost all the estimates appear to be the same.
However, it is worth mentioning two important changes
in the new estimates. First, unlike the corresponding esti-
mate in M6, the negative interaction between institution
and resource endowment (R_rich×polhar) in the second
column of Table A3 became statistically significant. This
indicates that the negative effect of a poor political (insti-
tutional) situation on product innovation is stronger in
resource-rich than in resource-poor countries. This gives
better support to hypothesis 1b. The second difference
relates to the effects of the variable generated by interact-
ing dummies for resource-rich and SSA (R_rich×SSA) on
process innovation. The odds ratio corresponding to the
interaction has increased (1.097) from its earlier value
(0.854) which has yet remained insignificant.
12 Ahmad, Akouwerabou and Lakew
Conclusion and Recommendation
This paper gives an alternative explanation to the ‘resource
curse’ thesis in African context from a microeconomic
perspective. A distinct analytical framework and method-
ology were applied to accommodate possible interactions
at the micro-, meso- and macro-levels. The main objective
was to examine if the innovativeness of firms operating in
non-resource sectors of Africa’s resource-rich economies
is hampered as a manifestation of ‘resource curse’.
Given the possible hierarchal linkages, a multi-level mod-
elling strategy was applied to better capture the effects of
variables at different levels. The analysis was based on the
World Bank’s enterprise surveys data collected from 30
different African countries. Macro-level variables corre-
sponding to these countries were extracted mainly from
Global Competitiveness Indicators database and African
Economic Outlook (AfDB et al. 2016).
The country-level descriptive analysis depicts that
resource-rich countries are less competitive than
resource-poor countries in terms of manufacturing value-
added and export, innovation and technological capabili-
ties. Similarly, countries in the MENA region have
better capabilities than their SSA counterparts in these
respects. The micro data, however, shows that the pro-
portions of firms in the MENA countries are relatively
lower than that of SSA countries. The econometric
results indicate that firm’s age, training and R&D are the
most important firm-level characteristics in determining
the likelihoods of both product and process innovation.
The hypothesized negative effect of a country’s high
resource endowment on firm-level innovation was
unfounded. High political hardening appeared to have
strong negative effect on innovation. Besides, there
seems to be weak evidence supporting the expectation
that resource abundance reduces innovation in countries
with poor political orders. However, the effect of political
hardening was found to be lower among firms with better
innovative capabilities.
The most interesting fining is with regards to the
differential impacts of resource intensity on the innovation
of firms in non-resource sectors of countries in SSA and
MENA. Firms in a resource-rich MENA country are
more likely to undertake product innovation than firms
in a resource-rich SSA country. In addition to this, the
effects of firms’ innovative efforts on innovation (both
product and process) were found to vary widely with
countries. However, the paper could not explain why the
outcomes of innovative efforts are high in some countries
while they appeared to be low in some others. This calls
for country specific in-depth researches as the way
forward. Nevertheless, apart from filling the knowledge
gaps, this study made a theoretical contribution that
would help explain the ‘resource curse’ thesis from micro-
economic perspective.
Based on this, resource-rich African countries would
be able to overcome the likelihood of facing the
‘resource-curse’ through protecting and building political
systems that would help develop effective institutional
and technological capabilities. The key to achieve this is
through making effective use of resource rents in building
the above capabilities which in turn create incentives for
firms to undertake innovations. Besides, facilitating con-
ditions that would stimulate firms’ innovative efforts
would be among the important measures to be taken at
the micro-level. The resulting increment in firm-level
innovation will definitely lead to both sectoral and aggre-
gate productivity. Therefore, there is high potential for
resource-rich African countries to jump-start growth-
enhancing structural change if they can make effective
use of revenues obtained from natural resources.
Disclosure statement
No potential conflict of interest was reported by the
authors.
Notes
1. Throughout this paper, resource refers to the stock of min-
erals and fuel (also called hard commodities) a country is
endowed with.
2. Throughout this paper, firms in the non-resource sectors or
just firms are referred to as enterprises engaged in manufac-
turing and service activities only.
3. Innovative efforts or capabilities are represented by R&D
spending of firms as this helps identify, acquire and adapt
new technologies (Lall 2003).
4. Composite measures of institution and innovation were
taken from WEF (2017) with the scores ranging from 1 to
7 with the high values representing better performances.
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14 Ahmad, Akouwerabou and Lakew

Appendixes

Table A1: Number of firms/observations by country and year.

Country Year No. of firms Country Year No. of firms

Nigeria 2014 2676 Tanzania 2013 & 2015 1237
Namibia 2014 580 Uganda 2013 762
S. Sudan 2014 738 Zambia 2013 720
Sudan 2014 662 Morocco 2013 407
Ghana 2013 720 Mali 2016 185
Ethiopia 2011 & 2015 1492 Senegal 2014 601
Burundi 2014 157 Lesotho 2016 150
Cameroon 2016 361 Togo 2016 150
DRC 2013 529 Egypt 2014 2897
Guinea 2016 150 Kenya 2013 781
Malawi 2014 523 Benin 2016 150
Mauritania 2014 150 CAR 2011 150
Niger 2017 151 Zimbabwe 2011 600
Rwanda 2011 241 Djibouti 2013 266
Swaziland 2016 150 Tunisia 2014 592
Total No. of firms 18,928

Table A2: Proportion of innovative firms by country.

Product innovation Process innovation

Kenya 0.68 Burundi 0.46 Rwanda 0.71 DRC 0.33
Uganda 0.64 DRC 0.42 Kenya 0.60 Mali 0.33
Namibia 0.64 Cameroon 0.41 Uganda 0.60 Sudan 0.33
Rwanda 0.61 Ethiopia 0.40 Namibia 0.59 Djibouti 0.30
Zimbabwe 0.59 Togo 0.37 Zimbabwe 0.56 Morocco 0.30
Sudan 0.55 Mali 0.36 Tanzania 0.53 Tunisia 0.25
Mauritania 0.55 Djibouti 0.35 Mauritania 0.52 South Sudan 0.24
Malawi 0.54 Niger 0.34 Ghana 0.51 Niger 0.18
Zambia 0.53 Morocco 0.31 CAR 0.51 Egypt 0.16
Tanzania 0.52 Guinea 0.31 Malawi 0.51 Togo 0.15
Ghana 0.51 Swaziland 0.28 Nigeria 0.50 Cameroon 0.15
Nigeria 0.50 Tunisia 0.27 Zambia 0.48 Benin 0.14
South Sudan 0.49 Benin 0.26 Burundi 0.41 Guinea 0.14
CAR 0.48 Egypt 0.20 Senegal 0.40 Swaziland 0.07
Senegal 0.48 Lesotho 0.05 Ethiopia 0.34 Lesotho 0.06
 African Journal of Science, Technology, Innovation and Development 15

Table A3: Results of multilevel mixed effect logit to check robustness.

Product innovation Process innovation

OR [Std. Err.] OR [Std. Err.] OR [Std. Err.]
lnage 1.049** [0.025] 1.050** [0.025] 0.995[0.025]
frmsize 1.104***[0.018] 1.103***[0.018] 1.080***[0.018]
training 1.876***[0.079] 1.877***[0.079] 1.887***[0.081]
exptopm 1.009 [0.007] 1.009 [0.006] 1.036***[0.008]
export 1.046 [0.048] 1.045 [0.048] 1.07[0.051]
privated 1.102 [0.065] 1.102 [0.065] 0.943[0.058]
RDS 3.231***[0.335] 2.559***[0.300] 2.903***[0.301]
foreign 1.218** [0.096] 1.214** [0.095] 0.984[0.083]
buscity 1.084** [0.041] 1.083** [0.041] 1.110***[0.044]
R_rich 1.406* [0.258] 5.257***[2.602] 1.185[0.646]
polhar 0.907* [0.049] 0.973 [0.061] 0.917[0.064]
SSA 1.613* [0.413] 2.819***[0.848] 1.892*[0.642]
polharxRDS – 1.116***[0.039] 1.122***[0.034]
R_richxpolhar – 0.857* [0.068] 0.971[0.085]
R_richxSSA – 0.282***[0.127] 1.097[0.545]
Retail Service 0.879***[0.034] 0.879***[0.033] 0.641***[0.025]
other service 0.758***[0.060] 0.762***[0.060] 0.692***[0.060]
2013 1.088 [0.173] 1.157 [0.182] 0.472***[0.081]
2014 1.161 [0.282] 1.074 [0.237] 0.544**[0.129]
2015 0.919 [0.117] 1.007 [0.130] 0.615***[0.084]
2016 0.324***[0.086] 0.335***[0.082] 0.054***[0.015]
2017 0.478 [0.245] 0.454* [0.206] 0.071***[0.037]
_cons 0.261***[0.087] 0.147***[0.054] 0.538[0.221]
Random-effects Parameters Country: Unstructured
Estimate[Std. Err.] Estimate[Std. Err.] Estimate [Std. Err.]

sd(RDS) 0.455[0.083] 0.364[0.079] 0.29[0.069]

sd(_cons) 0.427[0.068] 0.356[0.061] 0.408[0.067]
corr(RDS,_cons) −0.123[0.331] 0.063[0.341] −0.241[0.294]
No. of obs. 16843 16843 16812
No. of groups 30 30 30
Wald test 598*** 688*** 977***
LR test vs. logistic reg: 337*** 179*** 215***
*, **, *** indicate significances at 10%, 5%, and 1% respectively. Values in parentheses are standard.