Informal Knowledge Institutions and Market Innovation in Knowledge–Intensive Businesses.

Abstract

This study aims to investigate the influence of informal knowledge institutions on new market innovation in a developing economy. A framework is built in which small firms develop new market innovations through utilizing knowledge acquired from informal (e.g. personal contact, network of friends, families etc.) institutions. Data was collected through a survey of 510 small and medium sized enterprises (SMEs) in knowledge intensive businesses (KIBS) sector of Lagos, Nigeria at firm level. The findings suggest that the informal sources is more accommodating to the needs of small firms in a developing economy and serve as the primary source of knowledge resources for new market innovation. Thus, the informal system should be recognized as an important part of the institutional system influencing innovation in developing economies. We recommend the need to revise the policy to provide direction by providing necessary structure should be given to the informal institutions as they are becoming a focal point in the developing economies.