The Impact of the Institutional Environment on the Use of Licensed Technology

Abstract

The robustness of the institutional environment is a requisite factor for the growth and development of a firm. This study is focused on the impact of factors of institutional environment on SMEs’ acquisition and use of licensed technology from abroad. The independent variables considered as the factors of institutional environment are: financial institutions, regulatory institutions, infrastructure, and security, while the dependent variable is the use of licensed technology from abroad. Data from the manufacturing and the service sectors of the economies of Africa and the Middle East are collected from the database of the World Bank Enterprise Survey. The survey employs random sampling to select firms in each country. The firms are stratified based on the number of employees and the geographical region. Questionnaires are administered to firms from 2006 to 2018 through cross-sectional data collection method. By focusing on the scope of research on the two regions and SMEs, the sampled observations are scaled down from 136,887 to 33,977 firms in 53 countries. Although not all the Pearson correlation coefficients of the independent variables with the dependent variable are high, there are satisfactory levels of significance with p-values below 5%. The independent variables in the regression model have a statistically significant impact on the use of licensed technology from abroad. The forecasting power of the regression model, the possible implications from the test results are shown. The limitations of the research and the possible areas for future research are discussed in the last section.