The impact of innovation on formalization and job creation of informal SMEs in Cameroon: Evidence from the World Bank Enterprise Survey

Abstract

This study aims to examine the impact of innovation on the formalization and job creation of informal SMEs in Cameroon, using data from the World Bank Enterprise Survey 2016. The study found that while technological innovation increases the chances of formalizing a firm, product innovation reduces it. The jobs created are proportional to firm size and the nature of the firm’s innovations. The results highlight the need to design the adoption of technological innovations by informal SMEs and encourage the registration of the intellectual property of new products created by them. The study contributes to the understanding of the role of innovation in enabling informal SMEs to generate income and employment, which is essential for sustainable development in African countries. The study also suggests that innovation can be a driver of firm growth, but not necessarily formalization. Overall, the study emphasizes the need for policies that support the adoption and diffusion of innovations by informal SMEs in Cameroon.