Learning, product innovation, and firm heterogeneity in developing countries; Evidence from Tanzania

Abstract

Using firm data, this study investigates the various sources of firm learning, investment and linkages, and their importance for product innovation in Tanzania. The analysis reveals important differences in innovation strategies for foreign and local firms. Foreign innovative firms have stronger vertical linkages with other foreign firms and invest more in human and physical capital. Local firms offset these disadvantages through in-house R&D, connectivity, and collaboration with other local firms, proving to be more embedded in the local industrial structure.