Despite the high profile of the issue in current policy formulations in lowincome
countries (LICs), there is little empirical evidence on innovativeness
and firm performance in formal and informal establishments. This paper
aims to fill this gap in the literature using a revised Crépon-DuguetMairesse
(CDM) structural model to analyse data from a unique innovation
survey of 500 manufacturing firms in Ghana. We found that innovation
positively impact the labour productivity of firms, and learning instead of
technical based innovations are the significant factor. The effect is
significantly greater for informal establishments. We suggest that on the one
hand innovation is a factor that developing informal firms may push them to
the formal economy. On the other hand, surviving of some informal firms
may be linked to their ability to innovate.