The effect of firm informality on sustainable and responsible innovation in developing countries: Evidence from Nigeria

Abstract

At the turn of the millennium, developing countries face a twofold societal challenge. First, these countries need to understand the deep principles underpinning informality, which is by now recognized as a structuring phenomenon of their economies. Second, for reasons related to both intra- and inter-generational justice, these countries need to follow the sustainable development pathway. This paper highlights a micro-economic aspect of the relationship between these two goals by investigating how a firm being formal versus informal affects its sustainable and responsible innovation (S&RI) activity, a milestone for sustainable development. Using a propensity score matching methodological approach to analyze an original database extracted from the Nigerian Business Innovation Surveys for 2005-2007, we find that registered Nigerian firms have a higher propensity to introduce S&RIs than unregistered firms. This result is robust to alternative and widely used matching methods. Hence, in the prospect of sustainable development of Nigeria and developing countries in general, there should not be a hiatus between acknowledging and further understanding the importance of informality in the economy and promoting policies that give firms incentives to formalize.

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Reference

Farid Gasmi, Dorgyles Kouakou, and Maruf Sanni, “The effect of firm informality on sustainable and responsible innovation in developing countries: Evidence from Nigeria”, TSE Working Paper, n. 22-1368, October 2022.