Inter‐organizational cooperation, financial constraints, and firm's innovation: evidence from five African countries

The study examines whether to collaborate or with whom to collaborate to alleviate the adverse effect of financial constraints on innovation. It utilizes a survey of 1611 firms from five African countries, using from two merged datasets: the Innovation Follow‐Ups Survey and the World Bank Enterprise Survey. The study uses the 2014 survey waves, the latest innovation survey data for African countries. The result shows that inter‐organizational cooperation effectively alleviates the adverse influence of financial constraints on product innovation, while it only reduces its effect on process innovation. Specifically, cooperation with domestic firms, foreign firms, academic or research institutions, government, and consulting companies alleviates the adverse effect of financial constraints on product innovation. However, except for cooperation with the government, other modes of cooperation reduce but do not completely alleviate the adverse impact of financial constraints on a firm's process innovation. Firms with cooperation arrangements with the government can effectively alleviate the negative effect of financial constraints on both product and process innovation. The study further shows that different modes of cooperation have distinct effects on a firm's likelihood of having product or process innovation. Managers of financially constrained companies can consider cooperation as a coping strategy to mitigate the adverse influence of financial constraints on their innovation performance but should pay attention to partner selection.