The confounding influence of urban informality on innovation and production specialisation in production clusters: evidence from Nairobi

Abstract

This paper investigates two agglomeration economies, innovation and production specialisation, within Nairobi's handicraft sector. The paper asks if and by what mechanics urban informality might interfere with these important potential outcomes of clustered production. A hundred and two semi-structured interviews were conducted with participants of the industry. Findings suggest that informality contravenes innovative and specialised outcomes for firms through the introduction of high levels of entrepreneurial risk, diseconomies of informal agglomeration, and rational but problematic factors of production decisions by firms. The paper concludes by making intervention recommendations.