Business-Government Relations and Firm Innovation: The Moderating Role of Informal Market Competition and Top Management Gender

Abstract

This study examines the effect of business-government relations on the firm’s innovation in Ethiopia. The study further examined the moderating role of informal market competition and the gender of top management on the link between businessgovernment relations and firm innovation. The study used the latest available survey data from the 2015 World Bank Enterprise Survey for Ethiopia. A total of 552 firms from 14 industries are included in this study. The probit estimate results show that business-government relations significantly positively affect firms' innovation. Informal market competition eliminates the positive impact of business-government relations on innovation, while being a top female manager weakens the positive effect of business-government relations on innovation. Lastly, the firm’s innovation is also positively affected by firm size and R&D expenditure. The study has theoretical contributions and forwarded policy and managerial implications.