Understanding Innovation without R&D (Informal Innovation) and SME Performance in Rwanda: An Econometric Case Study

Abstract

Purpose: This study tests whether informal, non-R&D innovation improves firm performance among Rwandan small and medium-sized enterprises (SMEs). Methodology: Guided by absorptive-capacity and inclusive-innovation theory, we analyse nationally representative 2023 World Bank Enterprise Survey data (n = 358). Firm performance is proxied by log annual sales. Ordinary least squares estimates average effects, while quantile regression reveals distributional heterogeneity. Interaction terms examine whether export orientation conditions innovation returns. Findings: Informal innovation delivers no significant sales gains across the performance distribution. Only exporting firms secure marginal benefits, implying that complementary capabilities and market linkages are prerequisites for turning grassroots ingenuity into revenue. Research Implications: Cross-sectional data restrict causal inference and exclude micro-enterprises. Future longitudinal and mixed-methods work should trace capability-building trajectories. Practical Implications: Policy must shift from merely counting innovations to cultivating absorptive capacity—technical training, finance, and decentralised commercialisation infrastructure—so that under-the-radar innovators can scale. Originality/Value: This paper supplies rare large-sample evidence from an African context, challenges the universal growth narrative around innovation, and clarifies boundary conditions for theory and policy.