Public support of innovative activity in small and large firms in Mexico

Abstract

The National Science and Technology Council (CONACYT) was established in 1970 by the Mexican government. CONACYT was formed to promote the scientific development and technological modernization of Mexico through developing high-level human resources, encouraging research projects, and disseminating scientific/technological information. In 2009, CONACYT launched the Innovation Stimulus Program (PEI) to foster enterprises’ innovation activities and to encourage collaboration on innovation activities among firms and between firms and public research institutes and higher education institutions. Based on an analysis of project data from the PEI program over the years 2009 through 2014, we found that large firms are more innovative than small firms. And, firms that are more innovative are those that had prior funded research, collaborated with universities in the funded research project, added new employees during the research project, and faced larger markets for their innovations.

Plain English Summary Only a few studies have systematically compared publicly supported innovative behavior between groups of large and small firms within developing countries, and absent from this list is an analysis of Mexico. In this paper, we study research projects funded through Mexico’s Innovation Stimulus Program, and we find that large firms are more innovative than small firms. We also find that firms with previously funded research, that collaborated with universities in the funded research project, that added new employees during the research project, and that faced larger markets for their innovations are more innovative. Thus, the findings in this paper might provide an initial indication about those firms that will have a greater innovation-related response to the public funding to support their research.

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Notes

  1. 1.

    See Cunningham and Link (2021) for a comparative analysis of tax incentive programs among OECD and other countries.

  2. 2.

    Similar innovation stimulus programs have been implemented in Canada (NCR-IRAP innovation assistance program for over 70 years), Ireland (Enterprise Ireland's Innovation Vouchers Program established in 2007), Saudi Arabia (Cooperative technological innovation centers since 2012), and the United Kingdom (Innovation Vouchers for SMEs established in 2007) (CONACYT, 2018).

  3. 3.

    Different Mexican incentives and social programs have been replicated in multiples countries in Latin-America, Asia and Africa (The World Bank, 2014).

  4. 4.

    In fact, our review of the academic literature identified only two published empirical studies on innovative activity in South American countries. One study focused on Brazil (Frank et al., 2016) and the other study focused on Argentina (Chudnovsky et al., 2006).

  5. 5.

    This paper is not an assessment of the PEI program because we do not have comparative information about the innovative activity of firms that applied for PEI support but did not receive it. We urge the reader to view this paper as a source of descriptive information about the PEI program in an effort to provide information for other such programs in Mexico or in other countries.

  6. 6.

    The reason for CONACYT delimiting the dataset was to provide information on the most recent award as well as information on previous awards received for comparative purposes.

  7. 7.

    The percent of the population in poverty is defined as the percent of the population that cannot buy the basic food basked with their work income. This definition comes from the code book for the PEI project data.

  8. 8.

    The actual number of employees was not available in the CONACYT data; only a categorical size variable was available.

  9. 9.

    The number of such variables is constrained by information in the CONACYT dataset provided to us.

  10. 10.

    In separate models, Research Budget was measured as a natural logarithm to account for non-linearity, but the estimated marginal effects were not significant at a conventional level. These results are available from the authors on request.

  11. 11.

    Perhaps, and this is beyond the scope of this paper, a firm that expands its entrepreneurial ecosystem might, purposively or not, develop an economic force that offsets any narrowing of its entrepreneurial actions associated with its tendency to pursue a path dependent research agenda. Relatedly, see de Fuentes et al., (2021).

  12. 12.

    There are other studies of the impact of publicly funded research on innovative behavior in developed countries. See for example, studies related to the U.S. Small Business Innovation Research (SBIR) program: Audretsch et al., (2002); Leyden and Link (2015); Link and Oliver (2020); and Link and Scott (2010). Relatedly, see Link (2021) on innovations resulting from publicly funded R&D performed in U.S. federal laboratories.

  13. 13.

    See, for example, Goel and Nelson (2021) for a multinational analysis in which Mexico is one of the countries considered.

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Acknowledgments

The authors acknowledge the informational support from CONACYT during the data collection process.

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Correspondence to Albert N. Link.

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Guerrero, M., Link, A.N. Public support of innovative activity in small and large firms in Mexico. Small Bus Econ (2021). https://doi.org/10.1007/s11187-021-00517-1

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Keywords

  • Public program evaluation
  • Innovation
  • R&D
  • Mexico

JEL Classifications

  • O31
  • O38
  • O25
  • O54
  • H32