Human capital and innovation in Sub-Saharan countries: a firm-level study

Abstract

This paper contributes to the scarce literature on the relationship between human capital and innovation at the firm-level. In this paper we examine whether human capital endowments, such as the general level of schooling within a firm, and practices of firms, such as formal training and employee slack time, have a positive relationship with the innovative output of firms. We contribute by using a more sophisticated approach and analyse how different combinations of human capital elements affect innovation. We study this relationship in Sub-Saharan countries where the general level of human capital is lower compared with developed countries. The results illustrate that internal mechanisms that spur human capital are of particular importance for innovative output in this context. In addition, our results indicate that specific combinations of human capital elements can even have negative effects. In particular, for firms in the manufacturing sector that offer employee slack, the effect of employee schooling actually turns negative, while the combination of training and slack time does not have a significant effect.