Drivers of Innovation in the Industry and Services Sectors in Sub-Saharan Africa

Abstract

The paper investigated the drivers of innovation in the manufacturing, industry and services sectors of 20 countries in Sub-Saharan Africa (SSA) and found that (i) secondary education matters for value-added creation or innovation but the manufacturing and industry sectors need more and more labors with technical skills and high-level training; (ii) the elasticity of access to finance by firms, especially SMEs, on innovation or value-added generation appears to be decreasing with the increase of the development level of the manufacturing and industry sectors, demonstrating that SSA’s countries need to devote efforts in supplying more medium and long-terms credits to industrial firms; (iii) the positive spillover effects of technological transfers expected from the inflow of foreign direct investment did not manifest because those investments were mostly oriented towards natural resource-based industries and have had weak local contents; (iv) value-added creation or innovation in the manufacturing and services sectors were severely affected by weak regulatory quality and government ineffectiveness in many countries, however weak control of corruption had variegated effects on value-added generation in these sectors depending on the specific pattern of industrial progress concerned. Those results are subject to our assumption that globalization imposes high degree of competition between firms in the latter region and those from all over the world so that entrepreneurs in these countries must innovate in order to be able to generate significant value added in the sectors of industry and high-value added services.