Analysis of Factors Affecting Firm-Level Innovation Activity in Ethiopian firm

Abstract Many countries use, apply, and emphasize innovation policies to promote long-term development by building a knowledge economy focused on a skilled and well-paid workforce. Ethiopian firms have to learn to engage effectively in innovation activities to be able to create innovative products, processes, and services to make the SME ecosystem very active, capable, and efficient. The firm’s engagement in innovative activities must become mandatory. Firms must not lose their market share and customers in the future as a result of a shift in demand from existing customers for new technology. As a result, research was conducted to identify the fundamental factors influencing the success of innovations and to discover, provide, and forward workable solutions to Ethiopia's evolving firms. The data sources for firm-level innovation used in this paper are based on the Enterprise Survey conducted by the World Bank (WBES, 2011 and 2015). The WBES currently covers over 644 firms in 2011 and 862 in 2015. 372 firms have been used in the panel data survey. The factors affecting Ethiopian firms' innovativeness are then investigated using a panel regression model. Panel data regression can assist to control dependent variables on an in the dependent variable. The factors affecting Ethiopian firms' innovativeness are then investigated using a panel regression model. The paper explored Ethiopian firms' innovation by examining both the positive and negative factors that influence the variables such as training, R&D participation, education, and certification of a quality product that influence the innovation value chain. The paper suggests that firm owners and the government invest more in R & D involvement, training for workers who create new ideas, and the development of a firm website to boost innovation.