Does the cost of energy matter for innovation? The effects of energy prices on SME innovation in Sub-Saharan Africa

Abstract

PurposeEnergy and environment has gained traction within the field of entrepreneurship literature, but a comprehensive empirical study that examines the relationship between the cost of energy and small- and medium-sized enterprise (SME) innovation is an omission. Therefore, this novel study aims to examine the relationship between the cost of energy and SMEs innovation in Sub-Saharan Africa (SSA) by first examining the differential impact of the various generation sources on the price of electric energy. This research has enabled us to investigate and understand the transmission mechanism of increasing/decreasing electricity price on innovation decisions and activities of SMEs in SSA.Design/methodology/approachUsing quantitative approach, with the data from the World Bank Enterprise and Innovation Follow-up Surveys, the study utilises a Tobit model to test whether the generation mix (renewable and non-renewable generation sources) increases or decreases electricity prices and examine the impact of the cost of electric energy on SMEs innovation in SSA.FindingsThe findings of this study shows that the cost of electricity affects negatively on SMEs innovation decision and activities of SMEs in SSA. The impact of renewables on the price of electricity has a larger magnitude relative to that of non-renewables. This finding has implications for policy makers promoting renewable energy without a policy design to tackle the unintended price effect of promoting renewable energy.Originality/valueThis is the first study to introduce cost of energy into an innovation model and to empirically examine the role of cost of energy for innovation activities of SMEs in SSA. Further, it examines the sources of generation on electricity price in SSA. The study contributes towards the empirical literature, and the findings also have implication for policy makers regarding the unintended consequences of promoting the transition to low-carbon electricity generation sources on SMEs via the cost of doing business implication.

Ecological resource deficits as opportunities for environmental innovation across countries

“…Building a dataset that allows tracking the identified pathways over time would improve our understanding of the stability of these pathways. However, lack of longitudinal data and inconsistent measures has long been acknowledged (Horbach, 2008; Hussain et al ., 2022). This problem is exacerbated when studying environmental innovation across countries, as measures are often unavailable across countries, inconsistent or cover incompatible timeframes.…”

“…Future research could use more specific measures to provide a more finely grained picture of the nature of ecological pressures and the nature of environmental innovation. For example, Hussain et al . (2022) found a negative effect of energy costs on firm innovation in Sub-Saharan Africa which could be an important boundary condition for the relationship between nature-based resources and environmental innovation in specific geographical context.…”

“…Future research could use more specific measures to provide a more finely grained picture of the nature of ecological pressures and the nature of environmental innovation. For example, Hussain et al (2022) found a negative effect of energy costs on firm innovation in Sub-Saharan Africa which could be an important boundary condition for the relationship between nature-based resources and environmental innovation in specific geographical context. Given the urgency related to renewable energy transition, this line of research has the potential to contribute to a more in-depth understanding of the mechanisms that drive distinct types of environmental innovation across different country contexts.…”

The effect of electricity reliability on the sustainability of SMEs in Fako Division of Cameroon

“…Electricity is an essential commodity that has become indispensable in everyday life and human life and has been made easier today with its discovery because functions such as lighting, heating, cooling of homes, and the operation of various electrical appliances are possible (Mahmud o'g'li & Khudoymurodovich, 2022). A reliable supply of electricity is of great importance to SMEs, especially because they are the major players that promote growth in most economies (Hussain, Karimu, Salia, & Owen, 2022). In recent decades, the world has witnessed a significant boom in technology, which is dependent on availability and access to electricity (Milin, Mungiu Pupazan, Rehman, Chirtoc, & Ecobici, 2022).…”

Moderating Effects of Weather Conditions on the Relationship Between Electricity Supply Reliability and Sme Sustainability

“…Besides SMEs, the pillar of reliable electricity supply is generally a necessity in modern life (Rousseau, 2022). SMEs, being major drivers of economies, can only be sustainable in the presence of reliable electricity supply (Hussain et al, 2022). Furthermore, Nyemb & and Olga (2019) emphasized the difficulties in social progress in communities from SME survival if the fundamental pillar of a reliable supply of electricity is absent.…”