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The purpose of this paper is to investigate how firms in developing countries finance innovation. Notably, the study seeks to investigate whether innovative firms exhibit financing patterns different from those of non-innovative ones. It also examines the effect of financing sources on firm’s probability to innovate.

The study utilizes firm-level data from the World Bank Enterprise Survey. From 28 African countries, 11,173 firms have been included in the sample. A statistical t-test is used for two independent samples and logistic regression models.

The results show that innovative firms, specifically innovative small- and medium-size firms exhibit financing patterns different from non-innovative peers. Further analysis indicates that there is no statistically significant difference between the financing patterns of innovative and non-innovative large firms. In Africa, innovation is mostly financed using internal sources and bank finance. Equity finance and bank finance have shown a higher effect followed by internal finance, finance from non-bank financial institutions and trade credit finance on firms’ probability to innovate.

The management of innovative firms should reduce dependency on short-term and retained earning financing and increase the use of long-term instruments improve innovation performance.

A pending policy task for African leaders is to design and evaluate reforms to create a strong financial sector that willing to support the innovation process.

This study contributes to the existent literature on finance of innovation by examining how firms finance innovation activities in developing countries. This study provides evidence on how innovative firms exhibit financing patterns different from non-innovative ones from developing countries.

The purpose of this paper is to investigate how the innovative firm’s proprietary information has an impact on its debt financing preference. This study also examines the impact of industry-level competition on the debt financing orders and investigates how two exogenous shocks impacted on innovative firms’ financing policies.

This paper uses the three types of debt data, including bonds, private debt placements and bank loans and patent application data, in the USA from 1987–2008. The number of patents applications and industry-level competition are used as proxies for a firm’s innovation and industry-level sensitivity. In addition, to minimize endogenous concern, this study uses the propensity score matching analysis and difference-in-differences.

The patents are the primary determinants for innovative firms to choose the debt types. The paper shows that innovative firms have the debt preference order – public debt, private placement and bank loans. However, as competition increases, innovative firms devise the order reverse. Finally, the paper provides evidence that the American Inventor’s Protection Act (AIPA) and the tech bubble crash made investors depend more on firms with more patents.

This paper is the first to study the impact of the AIPA on innovative firms’ financial policies using the propensity score matching analysis. The findings imply that both patents and industry-level competition are important factors to understand the capital structures for innovative firms.

The purpose of this paper is to investigate the effect of financial constraints on innovation in developing countries. It also examines how the effect of financial constraints varies by sector and with main firm characteristics such as size and age.

The study utilizes matched firm-level data from two sources; the World Bank Enterprise Survey and the Innovation Follow-Up Survey. From 11 African countries, 4,720 firms have been included in the sample. A recursive bivariate probit model is used.

The result shows that financial constraints adversely affect a firm’s decision to engage in innovative activities and the likelihood to have product innovation and process innovation. The results point out that the extent of the adverse effect of financial constraints on innovation differs across the sectors, firm size and age groups. A firm’s innovation is also explained by firm size, R&D, cooperation/alliance, the human capital of the firm, staff training, public financial support and export. At last, the probability of encountering financial constraints is explained by firms’ ex ante financing structure, amount of collateral, accounting and auditing practices and group membership.

Managers should strengthen the internal and external financing capacity to reduce financing constraints and their adverse effect on innovation.

A pending policy task for African leaders is to design and evaluate reforms that reduce the adverse effects of financial constraints on innovation.

This study contributes to the existing literature on financing of innovation by examining how and to what extent financial constraints affect innovation across various sectors, size and age groups.

The link between openness and innovative performance has been established as an inverted U-shape relationship, namely, the openness-performance connection is not always positive. The purpose of this paper is to introduce the concept of partner heterogeneity to characterize the influence of “quality” changes in partners on innovative performance, that is, the focus of this paper. Given that partner heterogeneity is crucial in explaining open innovative performance, it is also worth placing the examination of this key construct in emerging regions such as China.

The sample selection of this study covers a wide range of industries, but requires that the sample firms be manufacturing enterprises with an open innovation strategy. With opportunities and challenges associated with partner collaboration toward open innovation, the Chinese province of Zhejiang has established its reputation. Thus, empirical data were collected randomly from data pool of Zhejiang Province Economic and Information Commission, as well as a survey questionnaire. Data were using a cross-sectional survey methodology encompassing diverse organizations, industries, and nations.

Empirical testing of this assumption in a sample of 217 manufacturing firms indicates that partner heterogeneities, which are classified as organizational heterogeneity, industry heterogeneity, and national heterogeneity are all positively associated with innovative performance, but the strength of this association is influenced by environmental turbulence. Technological turbulence significantly and positively modulates the relationships of organizational and national heterogeneities with innovative performance. Market turbulence also plays a significant positive role on the relationship between national heterogeneity and innovative performance, while technological and market turbulence roles on the relationship between industry heterogeneity and innovative performance are not confirmed.

This paper refines the connotative dimensions of partner heterogeneity around the core concept of partner heterogeneity in open innovation in the context of emerging region, China. The study presents a systematic, in-depth analysis, and verifies the impact mechanisms of partner heterogeneity in open innovation on innovative performance by integrating the resource-based view, organizational learning theory, and transaction cost theory.

The purpose of this paper is to explore the relationship between innovative behavior and firm performance to determine empirically whether managers’ innovative behavior impacts directly or indirectly on firm performance through innovative output. A proposed conceptual model is tested with the moderating effects of environmental dynamism.

An empirical study tests the conceptual model of a multi-industry sample of Tunisian small and medium-sized enterprises. For this analysis the author applies the partial least squares (PLS) technique using the software package SmartPLS, version 2.0.

Empirical findings reveal that innovative behavior acts on innovation output thus having a positive and significant effect on business performance. Direct effect on business performance is found to be positive but weakly significant. These positive relationships tend to decrease when market conditions are highly dynamic.

Managers should be aware of the strategic potential of their innovative skills which can reinforce a firm’s innovativeness in order to improve business performance.

This paper proposes a model showing how a manager’s innovative behavior affects innovation output thus enhancing firm performance. The proposed conceptual model gives a more specific vision with the introduction of environmental dynamism as a moderating factor.

The purpose of this paper is to present qualitative evidence on strategies undertaken by 34 innovative small firms.

The sample of innovative firms is solely recruited from the agri-business sector that are located in contrasting environments varying from rural areas with low urban influence to areas with high urban influence and “main” urban or city areas. The authors discuss strategies in the light of a theoretical approach that incorporates a resource-based view, dynamic capabilities (DCs) and social network theory.

Although there is diversity in strategies across the 34 innovative small firms, irrespective of their “rural” or “urban” environment, qualitative evidence sheds light on differences in the way that strategies are pursued.

The study indicates that small firms in rural environments can be just as innovative as their counterparts in urban environments; however, the authors demonstrate that they adopt different strategies, which have been shaped by their environment, to achieve innovation. The authors use the qualitative evidence to develop the theory of DCs and classify the sample into four clusters which marries the environmental context and innovative DCs.

The paper makes a contribution to a research gap on the way that the environment can shape management strategies in innovative small firms. It contributes to a limited literature in this area.

In their well-known contribution to the “varieties of capitalism” debate, Peter Hall and David Soskice (2001, Ch. 1) highlight the distinction between a “coordinated market economy” as exemplified by Germany and a “liberal market economy” as exemplified by the United States. Under the heading, “Liberal Market Economies: The American Case”, Hall and Soskice (2001, p. 27), argue:Liberal market economies can secure levels of overall economic performance as high as those of coordinated market economies, but they do so quite differently. In LMEs, firms rely more heavily on market relations to resolve the coordination problems that firms in CMEs address more often via forms of non-market coordination that entail collaboration and strategic interaction. In each of the major spheres of firm endeavor, competitive markets are more robust and there is less institutional support for non-market forms of coordination.

This paper explores how two understudied characteristics of a firm's product portfolio, namely, aging of products and (non)innovativeness of products, affect firm survival. The influence of these product portfolio characteristics on organizational mortality can be observed both at the firm and at the industry levels. Paradoxically, the portfolio's influence at the firm and at the industry levels may go in opposite directions. Specifically, I predict that portfolios with aging products make their firms weaker competitors and survivors. However by weakening these firms, “aging” portfolios reduce competitive pressures at the industry level and, therefore, improve firm survival indirectly by changing industry vital rates. In contrast, firms with innovative product portfolios should be stronger survivors. At the same time, they are likely to intensify competition in the industry and, as a result, diminish survival chances of all firms, including those with innovative products. The analyses of all firms’ product portfolios in the worldwide optical disk drive industry, 1983–1999, support these predictions.

Although the overall impacts of innovation and innovative practices have been emphasized in recent years, the effect on the growth of firms in Nigeria have not been proven. Therefore, this study aims to investigate the effect of innovative practices on the growth of quantity surveying firms (QSFs) in Nigeria.

The study adopted the quantitative correlational research design in which a well-structured questionnaire was used to collect data from QSFs in South-West, Nigeria. The data were analyzed using descriptive statistics and multiple regression analysis to investigate the effect of innovative practices on the growth of QSFs.

The study reveals that there is a significant increase in the growth indices used for assessing QSFs, while all the innovation variables were found to be reliable. Based on the result of multiple regression analysis, the relationships were identified as follows: quantity surveying (QS) software influenced the size growth of QSFs; QS software and services affected client growth and profit growth; and all innovation practices impacted asset growth of QSFs.

Although the use of software tools has been found to negatively affect the size of QSFs and other growth indices, there is need for them to embrace innovative software applications for more quality service delivery. In addition, QSFs should formulate strategic objectives that will guide them in taking informed decisions for diversification.

The outcome of this study provides information and direction for innovation practices required to bring about the growth of QSFs.

The debate over the innovative role of small firms has largely been resolved. However, researchers have yet to establish the basis for some small firms being more innovative than others and the impact of their innovations on their industry. There is also an imperative to augment current literature on small service firms. This paper presents a study of small service exporters and differentiates between three groups based upon their innovativeness. Using analysis of variance as the analytical technique, significant differences are found between groups, indicating that the more innovative firms are of greater potential value to their industry. The findings displayed in this paper support the push for innovation strategy as a means of developing new and emerging markets by pioneering small firms.