The interplay between innovation adoption and pricing competitiveness in Sub-Saharan Africa

Abstract

The objective of this work is to evaluate the effects of adopting technological innovation, non-technological innovation, and their complementarity on price competitiveness. This work employs a recursive bivariate probit model applied to microdata from 1897 firms in three Sub-Saharan countries: Cameroon, Côte d'Ivoire, and Senegal. This model allows us to solve the endogeneity problem by assessing the complementarity relationship between technological and non-technological innovation practices and their effects on firm competitiveness. The results confirm that technological and non-technological innovations are complementary and have significant effects on firms' competitive advantage in terms of price. This complementarity constitutes evidence that their simultaneous adoption contributes more to firms' competitiveness than the individual adoption of each type of innovation. Non-technological innovations facilitate the effectiveness of technological innovations, which leads to a competitive advantage of about 26 % when both types of innovations are adopted together. However, firms can also suffer significant losses in market share as a result of the non-adoption of innovations. Indeed, firms that do not adopt any innovations deteriorate their competitive advantage in terms of price by 4 % on average.