increase of 1 unit in the ICT index<sup>16</sup> will increase process innovation by 0.11 units and product innovation by 0.09 units. The coefficients are large and significant in Ghana and Kenya; while only significant for product innovation in Tanzania and process innovation in Uganda.

The table in Appendix C displays the results including organizational innovation. The sample is, however, significantly reduced given the fact the organizational section of the survey was only implemented to medium and large firms. In any case, the results confirm previous findings where ICT acts as an innovation enabler taking into account the effects from organizational innovation.

# **6.2.3 Innovation and productivity**

The final stage of the structural model is to estimate the impact of product and process innovation on productivity, proxied by sales per worker. Column (1) in the tables show the results of estimating the pooled and country by country regressions of the productivity equation. The coefficients for the ratio of capital to labor and on labor are significant in most specifications and with the expected signs.

The results for the innovation variables are, however, not statistically significant. Only in the cases of DRC, Tanzania, Uganda and Zambia; we find that product or process innovation are significant, and in some cases the coefficients show a puzzling negative sign.

One important element when looking at the relationship between ICT, innovation and productivity relates to the definition of innovation. So far, the paper has used the standard definition of innovation followed in most innovation surveys that relates to whether the innovation is new to the firm. In addition to the subjective nature of the question about “the introduction of significant changes” to measure innovation, the fact that only new to the firm counts as innovation is translated into very large innovation rates in these countries. Even considering that firms further away from the technological frontier may find it easier to implement incremental innovations, the actual measured rates are unreasonable high as compared to OECD and emerging market rates, and question the degree of “innovativeness” of such innovations and the potential presence of some noise in the data.

As a result, in Appendix D we reproduce the estimations for product and process innovation when using two alternative definitions for innovation: innovation new to the national market and innovation new to the international market. The objective is, therefore, to understand how the results change when we use a more restrictive measures of “innovativeness”.

Table D.1 shows the results for the new to the national market definition, while Table D.2 shows the results for the new to the international market definition. All the main coefficients of interest for these models are summarized in Table 22.

Two strong results emerge from the estimates. _First, ICT continues to be a very important enabler of more radical innovations, both product and process. Second, narrowing the definition to more radical innovations increases the significance of product innovation. In other words, ICT is an enabler of innovation, which increases productivity when innovations are more “radical” or “innovative”._ Our interpretation of this result is the fact that product innovation impacts positively innovation depending on the “quality’ or degree of “innovativeness” of the innovations introduced. In the case of new to the international market, or radical innovators, the degree of “innovativeness” is substantial and, therefore, we

> 16 The index ranges between -0.4 to 2.4, with an average close to zero.

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