Development Theories and Policies

Article Review Presentation

Prepared By ID NO.
1. EBA KEBEDE………….....GSR/0186/14
2. HABTAMU DESSISA …..GSR/0189/14
3. ZEBIBA MUNIR………....GSR/
Section-02
Thursday, April 13, 2023
 Topic: Effect of corruption and political instability
on enterprises’ innovativeness in Ethiopia:
pooled data based
Authors: Arega Shumetie and Mulugeta Damie
Watabaji
Journal : Innovation and Entrepreneurship
Published: 27 May 2019
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 The Main Idea of The Paper
Showing the degree of impact and examining the effect of political
instability, corruption, and other covariates on innovativeness of
Ethiopian enterprises.
Objective of the study
(1) Investigate the importance of governments’ effectiveness on enterprises’
innovativeness through mediator variables: corruption and political instability;
(2) Examine the direct or indirect effects of corruption on enterprises’
innovativeness;
(3) Investigate the effect of enterprises’ characters on their innovativeness;
(4) Examine how access to infrastructure affects enterprises’ innovativeness in
Ethiopia.
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 Methods
Setting: Guided by the conceptual framework and hypothesizes
Corruption has positive effect on political instability.
Political instability has negative effect on enterprises’ innovativeness.
Corruption in the government system has negative effect on enterprises’
innovativeness.
Enterprises’ legality has a positive effect on their innovativeness.
Enterprises’ participation in international markets has positive effect on
innovativeness.
Access to Internet has positive effect on enterprises’ innovativeness.
Sustainable power supply has positive effect on enterprises’ innovativeness.
Access to working capital has positive effect on enterprises’ innovativeness.
Active engagement in research and development activities has positive effect
on enterprises’ innovativeness. Thursday, April 13, 2023
 Methods Cont’d
Data source: considers secondary data collected in 2011 and 2015 by the World Bank from 644
and 848 enterprises (manufacturing, retailing, and non-retailing services) in the two
respective survey years.
Variables: main concern political instability and corruption

`
:Determinant ones website ownership, research and development activities,
foreign ownership, foreign-licensed technology, formal
employee training, and educational attainment of the top manager.
Data Analysis: Used both Descriptive and Econometric Methods
 Descriptive method includes simple statistics like average, ratio, tabulation, and graphical presentation of
the data.
 And used structural equation modeling (SEM) to examine the effect of political instability, corruption,
and other covariates on innovativeness of Ethiopian enterprises.
 SEM is a multivariate regression (i.e., multi-equation) model, wherein the response variables in one
equation may appear as a predictor in the other.
 In general, SEM captures effect of exogenous variables on the endogenous ones, and the interaction
among endogenous variables. Thursday, April 13, 2023
 Main Results/Findings of the Paper
 Ethiopian political instability affected enterprises’ innovativeness negatively and
significantly.
 Corruption has significant positive effect on Ethiopian enterprises’ innovativeness.
“greasing effect”- unexpected finding
 Power outage, time, and capital budgeted for research and development
activities positively affect enterprises’ innovativeness in Ethiopian.
 Access to Internet, training, and foreign markets have positive and significant effect.
 Even Type of enterprises has significant and positive effect on enterprises’
innovativeness in Ethiopia. From Manufacturing enterprises are more innovative
as compared to the other type of enterprises.
 Also, The study argued that severe corruption in a given country leads to more
politically instability. “Direct and indirect effect to Enterprises’ Innovativeness”
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Adequacy of the argument, theoretical and empirical soundness
• Shown Few past studies have tried to establish relationships between corruption and enterprises’ innovativeness.
 For instance, Mahagaonkar (2008) concluded has a significant negative association with enterprises’ product innovativeness while it
facilitates market innovativeness. Similar findings Gayle, Candace, and Christopher (2012)
• Also, According to several past studies, (Gayle et al., 2012; Hammed, 2018; Leydesdorff & Meyer, 2006; Varsakelis,
2006) political instability can be considered as a critical bottleneck for the innovation and overall economic
development of many countries.
But not address endogeneity problem and behavior of latent explanatory variables .
How does the persistent corruption affect Ethiopian enterprises’ innovativeness? Is Required!

Positive and Negative aspect ( Strength and weakness)

• Take account most determinant that affect enterprise innovativeness rather than
main concern which are political instability and corruption.
• But, constrained into Secondary Data and less flexible
• As indicated, limitation of macro level generalization about innovativeness since the
World Bank survey did not include samples from agricultural sector. Thursday, April 13, 20
 Relevance\Contribution to the literature
• Although there are few studies none of them considered corruption and
political instability simultaneously as explanatory variables and they did
not address endogeneity of the former variable.
 Even no empirical evidences are, authors hypothesize corruption to be one of
the root causes of the high magnitude of political instabilities the country
encountered.
• Moreover, research efforts to address the endogeneity problem make
tiny proportion, and this study employed SEM to this problem for further
investigation.
• The study constructed SEM considering enterprises’ innovativeness and
political instability as latent variables which is a peculiarity of this study
and an original contribution to the literature. Thursday, April 13, 202
 Paper linkages to the overall course
Enterprise innovativeness is under study which is one
factor of economic development.
The study targets the institutional approach to
development.
Methodology part uses SEM to analysis
The study implicates to the policy makers
Study advocates that an efficient and effective strategy
for corruption have to made at national level.

Thursday, April 13, 2023

 Conclusions and Recommendations
 Even though the study was pioneer in case of Ethiopia, have god
initiation for further investigation, in addition to addressing the
adverse effect of political instability and other covariates on enterprise
innovativeness'.
 Also, National systems of innovation are most likely to flourish in
developed, politically stable countries and less likely to prosper in
historically unstable countries.
 Unfortunately, we are facing the stated challenges at this instant and
inferring from the adverse and positive effect discussed on the study,
thus recommended to utilize important outputs for corrective measure.
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THANK YOU!!!

Thursday, April 13, 20