Firms in high-income economies were more likely to report introducing a new product or process than those in lower-income economies, according to the World Bank’s first complete global cycle of enterprise surveys.
The 2023 to 2026 survey cycle covers 164 economies and provides comparable information on firms and the environments in which they operate. The bank published its overview in October.
Across low- and lower-middle-income economies, 16% of surveyed firms reported a product or process innovation in the preceding three years. The corresponding shares were 23% in upper-middle-income economies and 28% in high-income economies.
These figures describe what respondents reported, rather than a measure of the commercial value of each innovation. They also do not establish that the income level of a country caused the difference.
What the survey measures
The World Bank’s enterprise surveys ask business owners and senior managers about subjects including sales, access to finance and their operating environment. Under the standard methodology, the sample covers registered firms with at least five workers and some private ownership in selected sectors.
That means the findings do not represent every business. Informal businesses, very small firms and sectors outside the standard sample may face different conditions. Country results should also be considered alongside the survey methods and dates for each economy.
An innovation need not be a globally unprecedented invention. Introducing a new product or changing a production process can take different forms across companies and markets. The survey does not tell a business which change will succeed with its customers.
Management and innovation move together
The World Bank also reports an association between its management-quality index and innovation. A 10-percentage-point difference in the index was associated with a 3-percentage-point difference in the likelihood of innovation.
The relationship is not proof that changing a management practice will produce that result. More innovative firms may adopt stronger processes, while financing, workforce skills or other factors could influence both.
For an owner, however, the result supports a practical question: does the business have a way to identify problems, test ideas and follow up on the results? A company may have skilled employees but lack the time or information to turn their suggestions into a workable product or process.
Why the business environment matters
Innovation requires more than an idea. A manufacturer may need reliable electricity, machinery, finance and suppliers before it can change a production line. A retailer developing a service may need to train staff and understand whether customers will pay for it.
Those costs can be difficult to absorb when credit is scarce or rules are hard to navigate. Earlier MBN reporting on electronic payments and access to small-business credit examined another connection between business practices and finance, while noting that an association does not establish cause and effect.
For policymakers, comparable surveys can help identify constraints that deserve closer investigation. For businesses, the income-group gap is a starting point rather than a forecast: results depend on the specific market, the investment required and whether customers value the change.
