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Innovation dynamics and productivity : evidence for Latin America

Author

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  • Crespi G.A.
  • Tacsir E.
  • Vargas F.

    (UNU-MERIT)

Abstract

Innovation is fundamental for economic catching-up and raising living standards. Evidence demonstrate a virtuous circle in which RD spending, innovation, productivity, and per capita income mutually reinforce each other and lead to long-term, sustained growth rates and may foster job creation. Previous evidence highlights that Latin America and the Caribbean LAC has great potential to benefit from investment and policies that foster innovation. However, one important limitation of previous research on innovation in LAC is the absence of harmonised and comparable indicators across the different countries. This seriously limits the possibility to infer policy conclusions that are not affected by country specificities with respect to data quality and coverage. Also, most of this research is focused on estimating firm level correlations without attempting to identify market failures or other limitations which harm innovation investment or which could guide policy. In this paper, a wide range of innovation indicators are analysed in order to describe the innovation behaviour of manufacturing firms in LAC using the Enterprise Survey ES database. Our objective is to understand the main characteristics of innovative firms in LAC and to gather new evidence with regard to the nature of the innovation process in the region. In this paper we apply a structural model based on Crepon, Duget and Mairesse 1998, to estimate the determinants of innovation RD and its impact on total factor productivity. We pay special attention to whether there is heterogeneity in the effects of investments in innovation on productivity and whether there is any evidence of spillovers that could guide policy design. We found strong evidence concerning the relationships between innovation input and output, and innovation output and productivity. We found that private returns to innovation depend on the type of innovation, being larger for product than process innovation. Furthermore, we found some evidence that spillovers are stronger in the case of product than process innovation. It was also found that innovation returns are higher for the most productive firms. This increasing relationship between returns and productivity is not consistent with an interpretation that financial constraints cause more harm to low productivity firms. However, it is consistent with alternative interpretations about the lack of innovation opportunities in the case of low productivity firms or that low private returns are the results of poor appropriability.

Suggested Citation

  • Crespi G.A. & Tacsir E. & Vargas F., 2014. "Innovation dynamics and productivity : evidence for Latin America," MERIT Working Papers 092, United Nations University - Maastricht Economic and Social Research Institute on Innovation and Technology (MERIT).
  • Handle: RePEc:unm:unumer:2014092
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    References listed on IDEAS

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    Cited by:

    1. -, 2016. "Exploring cooperation between the Republic of Korea and the Community of Latin American and Caribbean States (CELAC) in the areas of innovation and SME internationalization strategies," Documentos de Proyectos 715, Naciones Unidas Comisión Económica para América Latina y el Caribe (CEPAL).
    2. Diego Aboal & Ezequiel Tacsir, 2015. "Innovation and Productivity in Services and Manufacturing: The Role of ICT Investment," IDB Publications (Working Papers) 7381, Inter-American Development Bank.
    3. Jana Schmutzler & Edward Lorenz, 2018. "Tolerance, agglomeration, and enterprise innovation performance: a multilevel analysis of Latin American regions," Industrial and Corporate Change, Oxford University Press, vol. 27(2), pages 243-268.
    4. Adel Ben Youssef & Leila Peltier- Ben Aoun, 2015. "nformation and Communication Technologies: Their Use and Short and Long Run Effects," Economics Bulletin, AccessEcon, vol. 35(3), pages 1550-1562.
    5. Grazzi, Matteo & Pietrobelli, Carlo & Szirmai, Adam, 2015. "The performance of firms in Latin America and the Caribbean: Microeconomic factors and the role of innovation," MERIT Working Papers 041, United Nations University - Maastricht Economic and Social Research Institute on Innovation and Technology (MERIT).
    6. Sandra M. Leitner & Robert Stehrer, 2016. "The Role of Financial Constraints for Different Innovation Strategies: Evidence for CESEE and FSU Countries," wiiw Working Papers 125, The Vienna Institute for International Economic Studies, wiiw.
    7. repec:wsi:jikmxx:v:16:y:2017:i:04:n:s0219649217500423 is not listed on IDEAS

    More about this item

    Keywords

    Microeconomic Analysis; Economic Development; Industrialization; Manufacturing and Service Industries; Choice of Technology; Innovation and Invention; Technological Change; Diffusion Processes; Economic Growth and Aggregate Productivity;

    JEL classification:

    • O12 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Microeconomic Analyses of Economic Development
    • O14 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Industrialization; Manufacturing and Service Industries; Choice of Technology
    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes
    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General

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