Drivers of successful commercialisation of indigenous innovation: evidence from the Volta region, Ghana

Abstract

There is a limited understanding of the commercialization of indigenous innovation by firms in the small-scale industry (SSI) of many Sub-Saharan African countries. Meanwhile, SSIs and micro and small enterprises (MSEs) have become important strategic foci for governments in promoting entrepreneurship and innovation because of their potential for growth in terms of GDP, income, and jobs. In countries such as Ghana, a lack of reliable information from empirical studies has constrained appropriate policy formulation. Few studies that have investigated the factors that affect innovation and firm performance have not thoroughly examined the effects of these drivers on the commercial dimensions of sales, profitability, and employment generation of firms engaged in indigenous innovation activities. Even for variables such as finance, with evidence of overwhelming linkages, there are still shortcomings that require further investigations. Therefore, there is a need to thoroughly examine the drivers of commercialisation on the innovation performance of MSEs in order to profess appropriate interventions. The major aim of this study is to examine the impact of regulation, finance, organisational factors, market factors, and technology as key determinants of successful commercialisation of indigenous innovation in terms of MSE performance in Ghana. Theoretically, the study adopts Below-the-Radar Theory of Innovation (BRTI), focusing on the bottom of the pyramid (BOP) and the Frugal Innovation Theory (FIT) as the underlying theoretical frameworks. The study assumes that Ghanaian MSEs engaged in indigenous small scale industrial activities are resource-constrained, serves the poor and deal with institutional voids, and that affordability, availability, awareness, and acceptability are key issues and therefore test the effects of such factors in the commercialisation of indigenous innovation in Ghana. Methodologically, quantitative, and deductive reasoning approaches were used. Deductive reasoning has been adopted purposely to be able to test, confirm or reject various hypotheses presented and therefore make stronger claims which would be more impactful for decision makers. Primary data were collected through a quantitative method using a survey technique. Using stratified random sampling method, a total of 537 questionnaires were sent out in May 2021 to MSEs engaged in indigenous small scale industrial activities in the Volta Region of Ghana to collect primary data. Out of the number sent, 453 questionnaires were retrieved generating a response rate of 85%. Descriptive statistics and PLS-SEM were used to analyse the data. Following the Below-the-Radar Innovation views, and controlling for government incentives and commercialisation strategies, the study established regulation, finance, organisational factors, market factors and technology as the main drivers for the commercialisation of indigenous innovation in Ghana. The findings in respect of the control model suggest government incentives to buyers of indigenous innovation have significant positive effects on all the dimensions of firm performance measured in the study, while incentives to MSEs have mixed effects. Incentives to MSEs have insignificant effect on profitability, significant negative effect on sales and feeling of success, and positive effect on employment. Again, the result of the control model revealed mixed effects of commercialisation strategies on firm performance. Thus, the method of commercialisation is insignificant on sales, profitability and feeling of success, and only has significant positive effects on employment. Similarly, the use of university innovation intermediary services has negative effects on sales but positive effects on profitability, employment and feeling of success, whilist pricing strategy is insignificant on all the indicators. The result of the full model provided evidence that, at a 5% statistical significance level, all the selected variables have impact on MSE performance, except regulation on sales which is insignificant. Some of the commercialisation factors, however, relate negatively to some performance indicators: Regulation has negative impact on profitability; finance has negative impact on profitability and feeling of success; and both organisational factors and technology have negative impact on employment level. The study has made contributions to theory and policy, practice, and methodology. By using the data from 453 Ghanaian MSEs, the developed empirical model tested regulation, finance, organizational factors, market factors and technology as the main drivers of indigenous innovation performance at the firm level in terms of sales, profitability, employment and feeling of achieved success. This model and the resultant framework can be applied in any national innovation system in a developing country context by policymakers, entrepreneurs, and other actors. By synthesizing the innovation literature particularly on indigenous innovation and its commercialisation which has limited research attention, the current study also made contributions to the innovation literature. Other specific contributions of the study include applying BRTI theory to deepen the understanding of the role of MSEs in the Ghanaian national innovation system. It highlights MSEs as the conduit for expansion of the industrial sector, contribution to national income, employment generation and sustenance of entrepreneurship in the national innovation system. The study also provided leading empirical evidence from Ghana on the effect of demand-side incentives on innovation performance.