Essays on innovations, firm Productivity, and Employment In the context of Africa

No Thumbnail Available



Journal Title

Journal ISSN

Volume Title




Seemingly contentious views are mainstreamed in the literature regarding the most important sources for productivity changes in general. More precisely, it is reasonable to inquire why there are differences in productivity across countries, sectors, and businesses. This study mainly aims to investigate factors that could explain firms’ heterogeneity in Ethiopia. In line with this main objective, it also intends to provide empirical evidence about the impact of innovations on firm-level productivity and to identify sources of firm-level innovations in the developing countries context. Moreover, this study attempts to answer two key research questions: Does devaluation have a long-term impact on the performance of an exporting firm? And, is there any trade-off between firm-level innovation and employment in the context of Africa? To meet those objectives and to address the research questions mentioned above, four independent but interrelated studies were compiled in this dissertation. For all papers, panel data-sets are utilized, which allow to capture firm-specific fixed effects and track the changes in productivity within a firm over time. Total factor productivity (TFP) was estimated using control function estimators. To disentangle the effect of devaluation on firms’ productivity, four waves of a panel data-set of large and medium scale manufacturing (LMSM) firms of Ethiopia are used and a quasi-experimental technique with time-invariant exporters as a treatment group has been applied. To examine the interrelationship between research & development (R&D), information and communication technology (ICT), innovation, and productivity, we used two waves (2011 and 2015) of the World Bank (WB) enterprise survey (ES) data-set. The interrelationship between variables of interest were modelled as general structural equation model (GSEM) and were estimated using a fixed effect estimator. Finally, the impact of firm-level innovation and its spillover effects on employment was investigated using a panel data-set of the WB for six African countries. To establish the impact, a difference in difference (DID) estimator is applied in combination with matching. Results from the first paper indicated that devaluation does not have a strong long-term impact on exporting firms’ performance, but exporting firms are more productive than import-intensive firms in the post-devaluation period. We also found that R&D, innovations, and firm productivity are linked and the linkage between firm-level innovations and productivity is strong and robust. Thus, innovation is key to enhance firm-level productivity. Furthermore, our findings indicate that ICT increase firm-level innovations, and it has also a direct positive impact on firm’s productivity. Finally, we provide robust new evidence that innovations expand employment in the African context, and innovative firms have also positive intra-industry employment spillover effects. Policy implications of each paper’s findings are presented and discussed at the end of each chapter.



Innovations; Devaluation; Firm productivity; GSEM, ICT; Employment