Slack and Innovation in Africa: A Curve Linear Relationship

Abstract

In this study, we undertake the financial slack and innovation intensity linkage across industries in Africa.  We reported empirical evidence based on the data of 923 non-financial firms in 10 African countries. The industry-level robust regression result shows that the association between financial slack and innovation intensity varied across industries because of the heterogeneous nature R&D spending and financial slack accumulation of firms in different industries. That is, both a U-shape and an inverted U-shape relationship between slack and innovation intensity are confirmed. We finally discussed results and policy implications in detail.

Keywords: Africa, Financial Slack, Innovation intensity, R&D investment