Discussion Paper No. 271 of 2021 on The Nexus Between Innovation Gap and Firm Ownership in Kenya: A Gender Approach

Abstract

This paper sought to explore the gender gap in innovation among firms in Kenya. The study’s objective was to determine the extent of the gender innovation gap for male-owned and female-owned firms, and the factors contributing to this gap. Subsequently, the study incorporated the Blinder Oaxaca decomposition technique adopting the extended non-linear regression version by Fairlie. Cross-sectional data used was sourced from the World Bank Enterprise Survey 2018. The findings highlighted that the probability of female owned-firms to innovate was lower than that of male-owned firms, an indication that there was an innovation gap. Further, it was established that male-owned enterprises had better innovation outcomes as they possessed resources that femaleowned firms did not have. These resources include hiring of an experienced top manager who may require large compensation, thus hindering female-owned firms from recruiting due to the associated financial resource constraints. Additionally, there were unobservable factors that formed a larger portion of the innovation gap, indicating that there were structural biases that favoured male-owned firms to be innovative over female-owned firms. These structural biases are often associated with discrimination. These findings therefore shed light on gender inequalities that exist in the context of innovation. There is need for policy makers to promote gender equality by advocating and formulating policies that address structural biases, thus creating a level playing field in terms of promoting impartiality in innovation among male-owned and female-owned firms in Kenya. Reducing the unobservable structural biases that accounted for a higher share in gender innovation gap would significantly reduce the innovation gap in Kenya.