Innovation Performance and Embeddedness in Networks: Evidence from the Ethiopian Footwear Cluster

Abstract

This study focuses on innovation in a cluster of informal shoemaking firms in

The Effect of Industrial Cluster Policy on Firm Performance in Ethiopia: Evidence from the Leather Footware Cluster

“…In compliance with previous studies such as Giuliani (2007) and Gebreyesus and Mohnen (2013) the number of input suppliers, shoe traders and other similar footwear manufacturers with whom the firm frequently collaborates on information and experience exchange are used to measure the strength of the backward, forward and horizontal knowledge linkages respectively and the sum of the three businesses is used to measure the overall intensity of intra-cluster collaborative knowledge network .The Impact of the relocated cluster policy on the aforementioned collaborative knowledge linkages is estimated by negative binomial regression model and the estimation results are reported in Table 6. As shown in the first row of Table 6, the estimation results again disclose a negative relation between the cluster policy and the intensity of intra-cluster collaborative knowledge networks.…”

“…The coefficients of the spinoff dummy, which indicates whether the current firm owner was a former employee of another footwear manufacturing firm, is positive and significant in the employment, production and profit functions suggesting a positive relationship between prior work experience and firm performance. Consistent with the findings of Gebreyesus and Mohnen (2013), the study finds no evidence that family ties in the industry impact firm performance in all six measures. Firms´ ICT usage, years of operation, managerial experience, general human capital, distance from the nearest main road, and other related firm determinants also show the expected signs, though most of them are not statistically significant.…”

“…This adversely impacts the performance of the relocated firms as business networks are not only goods-centered linkages, but are also the major channels through which marketing and technical knowledge flow in the Ethiopian footwear cluster (Gebreyesus and Mohnen 2013). The study also finds a positive correlation between the two business network measures and the various firm performance indicators (see Annex 1).…”

“…ix The two way fixed effect and the difference in difference model yields similar results in the present context because the same firms are observed in two rounds (balanced panel data). x In the footwear industry design is the source of differentiation and hence it is the integral part of innovation (Gebreyesus and Mohnen, 2013) xi Martin and Sunley (2003) mentioned two dimensions of a cluster: geographical and functional. The former refers the physical co-location of similar or interconnected firms.…”

“…The latter refers the presence of trust, extent of collaborative knowledge network, and the strength of forward, backward and horizontal business linkages among firms in the cluster. xii In this study the status of business networks was measured in terms of the number of clients (shoe buyers) and input suppliers with whom the firm has permanent relations following Gebreyesus and Mohnen (2013). xiii However, more than 95% of them still expects a higher future benefit.…”