Unlocking Innovation from Within: The Role of Internal Knowledge in Enhancing Firm Performance in Sub-Saharan Africa

This paper examines the role of internal knowledge in driving innovation and firm performance in sub-Saharan Africa, using panel data from the World Bank Enterprise Surveys covering fifteen countries in the region. Specifically, the analysis assesses the extent to which internal knowledge, measured through employee educational attainment, stimulates innovation, and whether innovation, in turn, contributes to improved firm performance. The findings reveal that internal knowledge has a significant positive effect on innovation, and that both internal knowledge and innovation are key drivers of firm performance in developing country contexts. These results underscore the strategic importance of building firm-level knowledge capabilities to enhance competitiveness, particularly among manufacturing firms. The study offers valuable policy implications, emphasizing the need to strengthen internal learning systems, workforce skills, and innovation support mechanisms to foster inclusive industrial growth in sub-Saharan Africa.