Capital Is Not Enough: Innovation in Developing Economies

Abstract

Economic development and social entrepreneurship often conceive of poverty as a resource allocation problem in which a lack of capital prevents the poor from increasing their income through entrepreneurship. This allocative view, however, represents only one possible approach to conceptualizing entrepreneurial opportunity. The alternative discovery-and creativity-based views place a greater emphasis on innovation which implies that superior ideas are also needed if poverty is to be reduced through firm performance. Drawing from a survey of 201 small business owners involved in a microcredit programme in Nairobi, Kenya, we find that the financial, social, human capital-performance relationships are mediated in part by innovation. Further, we find that differentiation-related innovations lead to better firm performance than novelty-related innovations.

Innovation and productivity in formal and informal firms in Ghana

“…A Larger proportion of skilled employees in the firms is associated with innovation activities, and the correlation is significant for both technological and non-technological innovations. This supports Bradley et al (2012) study of Kenyan firms in which education and human capital were the main constraints to innovation. Competition seems to be a driver of innovation as well in the Ghanaian firms, pushing firms that work in competitive markets to innovate in order to remain in business.…”

“…The level of education of entrepreneurs is regarded as an important, although not a sufficient, condition for innovation. Bradley et al (2012) advocate that capital is not a "silver bullet", and education and human capital are the major constraints of innovation in Kenyan small firms. The lack of resources in the education system in many LICs makes the non-formal training the main source for learning, together with 'learning by doing' (Oyelaran-Oyeyinka and Lal, 2006).…”

Computer literacy and use of ICT as key factors of micro-enterprise success

“…In research by Bradley et al [4] they concluded that capital alone is not a 'silver bullet' for the problem of poverty in developing economies. They have shown that, similar to developed nations, innovation is necessary for microcredit businesses to achieve fi rm performance, which contribute to increases in income and standards of living.…”

Innovation capabilities of hi-tech small and medium-sized enterprises (SMES): A comparative analysis between China and France

“…Bradley et al [49] 43 show that innovation ensures that a firm enhances its performance, especially on profits. Creating new products keeps on satisfying customer desires.…”