Innovation in the Informal Economy

the central economic and social role of the informal sector is increasingly appreciated. Yet while evidence shows that informal entrepreneurs can drive innovation, research on innovation in developing countries has been devoted mostly to formal sectors, organizations and institutions. What is lacking are studies assessing the role of innovation emanating within and from the informal sector. Who is the archetypical innovator in the informal economy? What types of innovations are generated? What is different from what one would encounter in the formal economy? Finding answers to these questions is a new field of research. On the one hand, the literature devoted to the study of the informal sector does not directly address the topic of innovation. In fact, the ability of the informal economy to do “new things in a different way,” its inventive ingenuity, rarely features as a topic at all. On the other hand, the equally vast literature on national innovation systems in countries at different stages of development largely overlooks the informal sector.The objective of this chapter is to push the boundaries of research in this field, first by conceptually integrating so far separate analyses of innovation and the informal economy and second by using research methods not often used by those studying the economic and employment aspects of innovation or the informal economy. The findings are based on an analysis of the existing literature, but more importantly on analytical fieldwork conducted for this book in three countries, and in the context of research undertaken by the Open African Innovation Research (Open AIR) network