Barriers and drivers of firm level innovation in South Asian firms

Abstract

<p>Firm level innovation is widely acknowledged to be a powerful catalyst for driving economic growth and recuperating from the detrimental effects of unexpected internal or external shocks. This study explores the barriers and drivers that shape firm level innovation in the South Asian region. By gaining a better understanding of these factors, we can pave the way for fostering innovation, which is crucial for revitalising the South Asian economy and unlocking its full potential.</p> <p>This thesis by publication comprises three articles that examine the barriers and drivers of innovation. These articles also introduce the moderating variables that either mitigate or facilitate the acceleration of innovation. The three empirical studies adopt a positivist methodology centred on logit and probit models (bivariate probit model, multinomial logit model, binary logit model) that draw on data from the World Bank Enterprise Survey (ES). These models provide a statistical framework for analysing the relationships between variables to draw meaningful conclusions.</p> <p>The resource-constrained environment of the South Asian region imposes various barriers that hinder the maximum potential of firm level innovations. The first study of this thesis focuses on one of the significant obstacles for innovative firms in South Asia, which is the prevalence of a large informal sector that constitutes a considerable portion of the region’s economy. Informal competition increases the costs for formal firms and diminishes the incentives for innovation. However, innovative firms can mitigate the negative impact of informal competition by implementing strategies like providing free time for employees for creative thinking and investing in research and development activities (Abbas et al., 2022).</p> <p>The second study focuses on gender inequality, which poses another barrier for South Asian firms, particularly with regard to women’s representation in top management positions. Despite women constituting over half of the population in South Asia, the number of women in executive level positions is significantly lower than the global average. Weak institutional quality and patriarchal societal norms contribute to this disparity. Also, female entrepreneurs face financial constraints as the sources of finance for women in developing countries differ from those available to women in developed countries. Women in developing countries have limited access to loans and asset ownership and often rely on personal resources or support from family members. This study concludes that favourable business environments that include better institutional quality and improved access to finance can enhance the performance of female top managers.</p> <p>The third study focuses on the resource-constrained nature of South Asian economies, which necessitates exploring the drivers that can facilitate firm level innovation. Despite limited resources, this study finds that South Asian firms can enhance their innovative capacity by adopting basic technologies and leveraging available sources of information. Thus, addressing barriers and fostering favourable conditions for innovation are crucial for unlocking the potential of South Asian firms and driving economic growth in the region.</p> <p>This thesis provides recommendations for firms, policy makers, and governments in South Asia to mitigate the negative effects of the major barriers on innovation. The study suggests measures that can potentially help to reduce the obstacles faced by South Asian firms in their pursuit of firm level innovations. Additionally, the thesis identifies the factors that serve as drivers for the uptake and progress of firm level innovations in South Asia, and emphasises the importance of critical success factors in resource-constrained economies.</p>