Firms' sustainable and responsible innovation in Nigeria: Does informality play a role?

Abstract

At the turn of the millennium, developing countries face a twofold challenge. First, for reasons related to both intra- and inter-generational justice, these countries need to follow sustainable development pathways. Second, they need to understand the deep principles underpinning informality, which is by now recognized as a structuring phenomenon of their economies. This paper sheds light on the relationship between these two goals by investigating how a Nigerian firm being formal versus informal affects its sustainable and responsible innovation (S&RI) activity. Using the entropy balancing methodology to analyze a novel database extracted from the Nigerian Business Innovation Surveys, we find that registered Nigerian firms engage in S&RI much more than those that are not. This suggests that, from the perspective of sustainable development, there should be no hiatus between recognizing the important role of the informal sector in the economy and promoting policies that give firms incentives to exit from it. By encouraging the registration of firms operating informally, these policies should help Nigeria in its transition to a sustainable market economy.