Effect of knowledge sources on firm level innovation in Ghana

Abstract

This study analysed the effect of knowledge sources on firm level innovation in Ghana. To achieve this objective, the study applied a logit model on the 2013 Ghana Enterprise Survey and the 2014 Ghana Innovation Follow-up Survey with a total of 549 firms in all. It was found that the effects of knowledge sources are higher for process innovation than for product innovation. Specifically, internal R&D and training of workers were found to have a positive effect on both product and process innovations when internal sources of knowledge are considered in isolation. Purchase of equipment was also found to have a positive effect on both product and process innovation when considering the separate effect of external sources of knowledge. However, in the presence of both internal and external sources of knowledge, training of workers and purchase of equipment were found to have a positive and significant effect on product innovation whiles internal R&D, training of workers and purchase of equipment had a significant effect on process innovation. It was interesting to find an insignificant joint effect of internal R&D and purchase of equipment on product and process innovations. In the spirit of enhancing innovation in Ghana, this study recommends that the Ministry of Environment Science, Technology and Innovation formulate a policy that will ensure that firms devote a portion of their income for conducting internal R&D and also undertake in-house training. In addition, the Ministry of Finance should also offer tax incentives or subsidies for firms to acquire productive equipment and machinery in or outside the country.