Ethiopia has experienced double-digit economic growth for more than a decade. However, due to domestic firms' low capability of innovation, there has been no meaningful improvement in structural transformation. This study aims to identify the important drivers of innovation for Ethiopian domestic firms. The study employed a sample of 227 domestic firms as the unit of analysis. The data was subjected to both descriptive and econometric analysis (Binary Probit estimation) techniques to gain insights into the research question. The regression results indicate that variables such as training, machinery purchase, technology leasing, information technology, financial constraint, and geographical location play a critical role in determining domestic firms' innovation in Ethiopia. Thus, it is preferable if the Ethiopian government and firms organize relevant trainings for employees, reviews binding regulations governing capital goods import and technology leasing, and invests more in information technology and other facilities in rural areas.
Ezo Emako (Sun,) studied this question.