Formality, innovation and entrepreneurial business performance in francophone Sub-Saharan Africa
Journal of Small Business and Enterprise Development
ISSN: 1462-6004
Article publication date: 12 December 2023
Issue publication date: 28 March 2024
Abstract
Purpose
Recent work in the economics of innovation in developing countries increasingly considers the formality of business as a determining factor of economic development. However, current knowledge on how formality determines both innovation and business performance remains mixed. This article examines this relationship by analyzing, on the one hand, the role of formality on innovation and, on the other hand, the moderating effect of formality on the relationship between innovation and the performance of business in francophone Sub-Saharan Africa.
Design/methodology/approach
Based on a sample of 1,369 Cameroonian and Senegalese small and medium-sized enterprises (SMEs) from the International Development Research Center (IDRC), the Crepon Duguet et Maraise (CDM) technique was used to reduce the endogeneity bias inherent in this type of analysis.
Findings
The results show that formal companies have a better capacity for innovation. In addition, formality positively moderates the relationship between innovation and the performance of businesses in the case of product and commercial innovations. On the other hand, it negatively moderates the relationship between innovation and the performance for process and organizational innovations.
Practical implications
These results show that the advantages of formalization widely relayed by national public institutions and international organizations can present a risk for business if the expected gains are not accompanied by innovations.
Originality/value
This paper contributes to research by taking into account the heterogeneity of firms because it is one of the first to study formality as a moderator in the relationship between innovation and firm performance in Sub-Saharan African economies.
Keywords
Acknowledgements
The authors wish to thank the Editor-in-Chief of JSBED, Patrick J. Murphy and the anonymous reviewers for their constructive feedback, suggestions and guidance, which helped to lift the quality of the article. The authors also thank the anonymous reviewers of 20th GLOBELICS International Conference 2023. Additionally, the authors thank Dr KENMOE Romuald and Ms. KAPCHE Raissa for the econometric suggestions and guidance. Finally, thanks to Ms Victoria Gonzales TCHING BOBE, Ms BEYALA Marie, Ms Barbara NGONO NDJIE and Ms NJOMO Suzanne for proofreading.
Citation
Ndzana, M.E. and Mvogo, P.G. (2024), "Formality, innovation and entrepreneurial business performance in francophone Sub-Saharan Africa", Journal of Small Business and Enterprise Development, Vol. 31 No. 2, pp. 350-376. https://doi.org/10.1108/JSBED-04-2023-0170
Publisher
:Emerald Publishing Limited
Copyright © 2023, Emerald Publishing Limited