**Table 1. How different are pioneers in FCS? Controlled averages across firms**

||Pioneers in<br>non-FCS vs.<br>Others|Pioneers in<br>FCS vs.<br>Pioneers in<br>Non-FCS|Pioneers in<br>FCS vs.<br>Others||||
|---|---|---|---|---|---|---|
|Firm Characteristics|(β)|(γ)|(β+γ)|Constant|Observations|R-squared|
|Age|2.128***|-3.354***|-1.226|19.49***|67,763|0.031|
|Size (number of workers)|38.61***|-49.71***|-11.1|85.05***|68,181|0.032|
|Manufacturing (=1)|0.126***|-0.270***|-0.144|0.513***|69,313|0.025|
|Purshase of fixed assets (% of firms)|22.79***|-2.158***|20.632|27.36***|68,389|0.058|
|Internationally-recognized quality certification (%)|13.76***|-13.48***|0.28|25.20***|67,131|0.062|
|Skilled workers (in percent of all production workers)|-4.421***|0.860|-3.561|74.53***|34,803|0.005|
|Firms with formal training to employees (%)|0.244***|-0.179***|0.065|0.259***|68,631|0.063|
|Firms with a female top manager (%)|-0.0105***|-0.0516***|-0.0621|0.137***|69,038|0.014|
|Foreign ownership (%)|2.414***|5.464***|7.878|5.220***|68,478|0.008|
|Public ownership (%)|-0.121**|-0.0668|-0.1878|0.705***|68,512|0.000|
|Sole proprietorship(%)|-0.0332***|0.134***|0.1008|0.376***|69,075|0.007|
||*** p<0.01, *|* p<0.05, * p<|0.1||||

_Source:_ Calculations based on World Bank Enterprise Surveys (2018).

_Note:_ The regression equation is specified as follows: x� �α�p�β�FCS �p�γ�δ� �ε� where x� indicates the characteristics of firms _i_ ; p� is a binary indicator for pioneering; FCS is a binary indicator for operating in a fragile state, and δ� are sector fixed effects. Since the specification includes an interaction term with two binary indicators, coefficient β captures the average difference between pioneers in non-FCS and others i.e. non-pioneers operating anywhere (Column 1 from left to right) controlling for the sector of economic activity. Coefficient γ (Column 2) captures what is distinctive about pioneers in FCS, relative to pioneers in non-FCS i.e. the effect of fragility on pioneering. The sum of the coefficients �γ, whose statistical significance is not directly estimated, summarizes the differences between pioneers in FCS and others i.e. non-pioneers anywhere (Column 3).

What is noteworthy in that respect is that pioneers in fragile states have additional experience, but also the fact that they can innovate at smaller sizes, and rely less on fixed assets, international certification, and worker training (see Table 1). The level of development and diversification of these markets suggests an intuitive explanation: the scope for innovation is much broader. More opportunities for simpler innovation can be found in fragile states, even for firms that are sole proprietorships. We encounter many more pioneers active in services, but this is largely due to the complete absence of manufacturing activities. And while foreign firms are a minority, they are significantly more likely to pioneer relative to domestic firms, independently of the state’s level of fragility.

**Table 2. Type of innovation by pioneers**

||**Pioneering firms in**<br>**FCS countries**|**Pioneering firms in non-**<br>**FCS countries**|
|---|---|---|
|**_Innovation_**|||
|New products or services introduced during the last 3 years (%)|75.21|73.02|
|Improved process introduced during the last 3 years (%)|75.56|80.78|
|Newproducts or services also new for the firm's main market(%)|69.30|67.02|

_Source:_ Calculations based on World Bank Enterprise Surveys (2018).

But do pioneers innovate differently in fragile states rather than elsewhere? Many tend to innovate simultaneously: those that introduce a new product in the market tend to also introduce a new process and enter new markets. But, importantly, in fragile states the share of pioneers that 8