Technological Innovation in Developing Countries: Theoretical Analysis and Empirical Evidence from Sub-Saharan Africa

Technological innovation constitutes a promising alternative to allow many people in developing countries to escape a situation of poverty. This project analyzes four basic questions. First, what are the characteristics of the firms that introduce new products and/or processes in developing countries. Second, how do these firms do innovation. Third, what are the consequences of technological innovation. Finally, what are the main obstacles to innovations that these firms must overcome.

The study of these questions will shed light that will permit a more adequate design both of public policies, as well as managerial strategies. The project includes the development of theoretical models, based on the available empirical evidence, that incorporate features specific to these countries, such as a relatively low absorptive capacity of firms, institutional factors that hinder intellectual property rights, or competitive pressure by firms in the informal sector, which oftentimes is larger than the formal sector in terms of employment.

The geographic scope of this project is Sub-Saharan Africa. This region has traditionally been regarded, for its cultural and institutional characteristics, as one with low capacity to absorb technology, which has hindered local innovation and technology transfer from developed countries. However, the recent development of M-Pesa, a mobile money system in Kenya, constitutes a significant example of indigenous innovation. This innovation responds to the needs of the local people, and its development is bringing about large efficiency gains, as well as inclusion of a part of the population which used to be excluded from the financial system. The ultimate goal of this project is precisely the design of policies that foster the development of M-Pesa-like phenomena, which have a real impact on the lives of millions of people.

This project is led by the Resident Fellow, Professor Pedro Mendi.

Collaborators

Sergio Daga (NCID)

Godfrey Madigu (NCID)

Robert Mudida (Strathmore University, Kenia)

Abiodun Egbetokun (NATECEM, Nigeria)

Nazeem Mustapha (HSRC, Sudáfrica)

Picture by: Fiona Graham (WorldRemit)

Contributors: Strathmore University, NATECEM (Nigeria), HSRC (Sudáfrica)

Financing: Fundación Ramón Areces