Formal Institutional Quality and Product Innovation: Moderating Effects of Policy Instability and Technological Infrastructure

Abstract

Grounded in the strategy tripod view, this research aims to examine the relationship between formal institutional quality and product innovation while considering the moderating effects of policy instability and technological infrastructure. The study focuses on 44 emerging markets in sub-Saharan Africa (SSA) using data for the period 2006–2022, with empirical evidence based on the probit model with two-way fixed effects. This research revealed that (i) formal institutional quality positively influences product innovation; (ii) technological infrastructure modulates formal institutional quality for an overall negative impact on product innovation; (iii) policy instability and technological infrastructure positively modulate the relationship between formal institutional quality and product innovation; (iv) policy instability positively modulates the relationship between formal institutional quality and product innovation, and this improves with technological infrastructure. This multidimensional analysis provides valuable insights for policymakers and firm managers seeking to foster a favorable environment for innovation in emerging markets. © 2025 Wiley Periodicals LLC.