Product innovation and informal market competition in sub-Saharan Africa

Elvis Korku Avenyo*, Maty Konte, Pierre Mohnen

*Corresponding author for this work

Research output: Contribution to journalArticleAcademicpeer-review

9 Citations (Web of Science)


The interaction between formal and informal businesses continues to grow in African countries. Yet, competition from informal enterprises remains one of the top three obstacles formal businesses face in sub-Saharan Africa. This paper investigates the effect of informal competition on the performance of innovative products introduced by formal firms. We combine the World Bank's Enterprise Survey with the Innovation Follow-up Survey for five sub-Saharan African countries, and construct two indicators of informal competition, one regional (local)-specific and the other one industry-specific. We find that local informal competition has a robust negative effect on product innovation intensity of formal firms, while within industry informal competition enhances innovative sales. However, larger firms are less affected by local informal competition and actually get a boost in innovative sales from informal competition. We argue that local informal competition harms the performance of product innovation, but only for formal firms that lack strategic collaborative 'footholds' in the informal economy.
Original languageEnglish
Pages (from-to)605-637
Number of pages33
JournalJournal of Evolutionary Economics
Issue number2
Early online date5 Jul 2020
Publication statusPublished - Apr 2021

JEL classifications

  • d22 - Firm Behavior: Empirical Analysis
  • l21 - Business Objectives of the Firm
  • l25 - Firm Performance: Size, Diversification, and Scope
  • o17 - "Formal and Informal Sectors; Shadow Economy; Institutional Arrangements"
  • o31 - Innovation and Invention: Processes and Incentives


  • Informality
  • Market Competition
  • Product innovation
  • sub-Saharan Africa

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