Determinants of innovation capability in the informal settings

Abstract

This study contributes to the growing literature on innovation capability in the informal sector in Nigeria. It explores the role of openness as a facilitator for measuring innovation capability, and proposes openness as a metric for the measurement of innovation capability in the informal sector. This new metric was tested using 200 informal information and communication technology (ICT) enterprises at the Otigba hardware cluster, which is located in the Nigerian commercial capital of Lagos and is regarded as a key ICT hub in West Africa. The main research instrument was a set of questionnaires designed to capture the core objective of the research. All 200 questionnaires were retrieved and found suitable for analysis. The questionnaires elicited information on the socio-demographic characteristics of the enterprises, the attributes of the Otigba cluster, the strength of the enterprises, the strength of the cluster, the extent of innovations within the cluster, and the proximity advantages drawn from clustering. Spearman's correlation and binary logistic regression were used to determine the direction and impact of the various independent variables (determinants of innovation capability) on the dependent variable (the extent of innovation as a proxy for innovation capability). It was found that openness plays a very significant role in access to: information, customers, new domestic markets, tools and technology, suppliers of raw materials, and inputs. However, openness was found to play only a limited role in finished products for the export market. It was also found that much more still needs to be done by the enterprises to build up their internal capabilities, so as to reduce their reliance on external sources of knowledge - notwithstanding the fact that exposure to external capabilities, through cooperation and openness, will remain necessary to complement enterprises' internal capabilities.