Effect of corruption and political instability on enterprises’ innovativeness in Ethiopia: Pooled data based

Abstract

The aim of this study is to investigate the effects of corruption and political instability on Ethiopian enterprises’ innovativeness based on pooled data from 644 and 848 enterprises (manufacturing, retailing, and non-retailing services) surveyed in 2011 and 2015, respectively by the World Bank. Both descriptive statistics and structural equation modeling (SEM) were employed for the data analysis. The descriptive statistics results revealed the decline in Ethiopian enterprises’ innovativeness during 2015 in comparison with 2011. Similarly, Internet access and training provided to permanent employees somehow decrease over the study period, which are believed to be unfavorable for enterprises’ innovativeness. The model results revealed significant greasing effects of corruption, power outage, time and capital budget for R&D activities, exposure to foreign markets, provision of formal training to permanent employees, and number of employees with high school education on Ethiopian enterprises’ innovativeness. However, political instability has significant negative effects on enterprises’ innovativeness in the country. The study implies that quality of labor, access to training and foreign markets, and political stability are covariates that seek special attention of enterprises and other concerned parties to enhance innovativeness.