Innovative firms or innovative owners ? determinants of innovation in micro, small, and medium enterprises
AbstractInnovation is key to technology adoption and creation, and to explaining the vast differences in productivity across and within countries. Despite the central role of the entrepreneur in the innovation process, data limitations have restricted standard analysis of the determinants of innovation to consideration of the role of firm characteristics. The authors develop a model of innovation that incorporates the role of both owner and firm characteristics, and use this to determine how product, process, marketing, and organizational innovations should vary with firm size and competition. They then use a new, large, representative survey from Sri Lanka to test this model and to examine whether and how owner characteristics matter for innovation. The survey also allows analysis of the incidence of innovation in micro and small firms, which have traditionally been overlooked in the study of innovation, despite these firms comprising the majority of firms in developing countries. The analysis finds that more than one-quarter of the microenterprises are engaging in innovation, with marketing innovations the most common. As predicted by the model, firm size has a stronger positive effect, and competition a stronger negative effect, on process and organizational innovations than on product innovations. Owner ability, personality traits, and ethnicity have a significant and substantial impact on the likelihood of a firm innovating, confirming the importance of the entrepreneur in the innovation process.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by The World Bank in its series Policy Research Working Paper Series with number 4934.
Date of creation: 01 May 2009
Date of revision:
E-Business; Education for Development (superceded); Innovation; Labor Policies; Microfinance;
Other versions of this item:
- de Mel, Suresh & McKenzie, David & Woodruff, Christopher, 2009. "Innovative Firms or Innovative Owners? Determinants of Innovation in Micro, Small, and Medium Enterprises," IZA Discussion Papers 3962, Institute for the Study of Labor (IZA).
- O31 - Economic Development, Technological Change, and Growth - - Technological Change; Research and Development; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives
- L26 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Entrepreneurship
This paper has been announced in the following NEP Reports:
- NEP-ALL-2009-05-30 (All new papers)
- NEP-CSE-2009-05-30 (Economics of Strategic Management)
- NEP-ENT-2009-05-30 (Entrepreneurship)
- NEP-INO-2009-05-30 (Innovation)
- NEP-KNM-2009-05-30 (Knowledge Management & Knowledge Economy)
- NEP-MFD-2009-05-30 (Microfinance)
- NEP-MIC-2009-05-30 (Microeconomics)
- NEP-MKT-2009-05-30 (Marketing)
- NEP-TID-2009-05-30 (Technology & Industrial Dynamics)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Paul M Romer, 1999.
"Endogenous Technological Change,"
Levine's Working Paper Archive
2135, David K. Levine.
- Robert E. Hall & Charles I. Jones, 1999.
"Why Do Some Countries Produce So Much More Output Per Worker Than Others?,"
The Quarterly Journal of Economics,
MIT Press, vol. 114(1), pages 83-116, February.
- Robert E. Hall & Charles I. Jones, 1999. "Why Do Some Countries Produce So Much More Output per Worker than Others?," NBER Working Papers 6564, National Bureau of Economic Research, Inc.
- Aghion, P. & Howitt, P., 1990.
"A Model Of Growth Through Creative Destruction,"
DELTA Working Papers
90-12, DELTA (Ecole normale supérieure).
- Aghion, P. & Howitt, P., 1989. "A Model Of Growth Through Creative Destruction," Working papers 527, Massachusetts Institute of Technology (MIT), Department of Economics.
- Aghion, P. & Howitt, P., 1989. "A Model Of Growth Through Creative Destruction," UWO Department of Economics Working Papers 8904, University of Western Ontario, Department of Economics.
- Philippe Aghion & Peter Howitt, 1990. "A Model of Growth Through Creative Destruction," NBER Working Papers 3223, National Bureau of Economic Research, Inc.
- Klette, Tor Jakob & Kortum, Samuel S, 2002.
"Innovating Firms and Aggregate Innovation,"
CEPR Discussion Papers
3248, C.E.P.R. Discussion Papers.
- Tor Jakob Klette & Samuel Kortum, 2002. "Innovating Firms and Aggregate Innovation," NBER Working Papers 8819, National Bureau of Economic Research, Inc.
- Jakob Klette & Samuel Kortum, 2002. "Innovating firms and aggregate innovation," Staff Report 300, Federal Reserve Bank of Minneapolis.
- Klette, Tor Jakob & Kortum, Samuel, 2002. "Innovating Firms and Aggregate Innovation," Memorandum 02/2002, Oslo University, Department of Economics.
- Rita Almeida & Ana Margarida Fernandes, 2008.
"Openness and Technological Innovations in Developing Countries: Evidence from Firm-Level Surveys,"
The Journal of Development Studies,
Taylor and Francis Journals, vol. 44(5), pages 701-727.
- Almeida, Rita & Fernandes, Ana Margarida, 2006. "Openness and technological innovations in developing countries : evidence from firm-level surveys," Policy Research Working Paper Series 3985, The World Bank.
- Almeida, Rita K. & Fernandes, Ana Margarida, 2007. "Openness and Technological Innovations in Developing Countries: Evidence from Firm-Level Surveys," IZA Discussion Papers 2907, Institute for the Study of Labor (IZA).
- Feder, Gershon & Just, Richard E & Zilberman, David, 1985. "Adoption of Agricultural Innovations in Developing Countries: A Survey," Economic Development and Cultural Change, University of Chicago Press, vol. 33(2), pages 255-98, January.
- Lee, Cassey, 2004. "The Determinants of Innovation in the Malaysian Manufacturing Sector: An Econometric Analysis at the Firm Level," Centre on Regulation and Competition (CRC) Working papers 30670, University of Manchester, Institute for Development Policy and Management (IDPM).
- King, Robert G. & Levine, Ross, 1993. "Finance, entrepreneurship and growth: Theory and evidence," Journal of Monetary Economics, Elsevier, vol. 32(3), pages 513-542, December.
- Cohen, Wesley M. & Levin, Richard C., 1989. "Empirical studies of innovation and market structure," Handbook of Industrial Organization, in: R. Schmalensee & R. Willig (ed.), Handbook of Industrial Organization, edition 1, volume 2, chapter 18, pages 1059-1107 Elsevier.
- de Mel, Suresh & McKenzie, David & Woodruff, Christopher, 2008.
"Who are the microenterprise owners ? Evidence from Sri Lanka on Tokman v. de Soto,"
Policy Research Working Paper Series
4635, The World Bank.
- de Mel, Suresh & McKenzie, David & Woodruff, Christopher, 2008. "Who Are the Microenterprise Owners? Evidence from Sri Lanka on Tokman v. de Soto," IZA Discussion Papers 3511, Institute for the Study of Labor (IZA).
- Goldbach, Stefan, 2012.
"Innovation and Education: Is there a ‘Nerd Effect’?,"
Darmstadt Discussion Papers in Economics
56008, Darmstadt Technical University, Department of Business Administration, Economics and Law, Institute of Economics (VWL).
- Goldbach, Stefan, 2012. "Innovation and Education: Is there a 'Nerd Effect'?," Annual Conference 2012 (Goettingen): New Approaches and Challenges for the Labor Market of the 21st Century 62307, Verein für Socialpolitik / German Economic Association.
- Almeida, Rita K. & Aterido, Reyes, 2010.
"The investment in job training : why are SMEs lagging so much behind?,"
Social Protection Discussion Papers
54967, The World Bank.
- Almeida, Rita K. & Aterido, Reyes, 2010. "The Investment in Job Training: Why Are SMEs Lagging So Much Behind?," IZA Discussion Papers 4981, Institute for the Study of Labor (IZA).
- Shawn Cole & Martin Kanz & Leora Klapper, 2012.
"Incentivizing Calculated Risk-Taking: Evidence from an Experiment with Commercial Bank Loan Officers,"
Harvard Business School Working Papers
13-002, Harvard Business School.
- Cole, Shawn & Kanz, Martin & Klapper, Leora, 2012. "Incentivizing calculated risk-taking :evidence from an experiment with commercial bank loan officers," Policy Research Working Paper Series 6146, The World Bank.
- Waheed, Abdul, 2011. "Size, competition, and innovative activities: a developing world perspective," UNU-MERIT Working Paper Series 052, United Nations University, Maastricht Economic and social Research and training centre on Innovation and Technology.
- Almeida, Rita K. & Aterido, Reyes, 2010. "Investment in job training : why are SMES lagging so much behind ?," Policy Research Working Paper Series 5358, The World Bank.
- Fox, Louise & Sohnesen , Thomas Pave, 2012. "Household enterprises in Sub-Saharan Africa : why they matter for growth, jobs, and livelihoods," Policy Research Working Paper Series 6184, The World Bank.
- Khamis, Melanie, 2009. "A Note on Informality in the Labor Market," IZA Discussion Papers 4676, Institute for the Study of Labor (IZA).
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Roula I. Yazigi).
If references are entirely missing, you can add them using this form.