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Innovation for economic performance: the case of Latin American firms

Abstract

In this paper, a wide range of innovation indicators are analyzed in order to describe the innovation behavior of manufacturing firms in Latin America and the Caribbean (LAC) using the recently released Enterprise Surveys 2010. The Enterprise Surveys define innovation rates as the share of firms introducing product and process innovations. The survey also measures the proportion of firms investing in research and development (R&D) and filing for intellectual property rights. The aim of this paper is to understand the main characteristics of innovative firms and to gather new evidence with regard to the nature of the innovation process in the region. Statistics about the performance of LAC firms are provided using different types of indicators to measure firms’ innovative behavior. In particular, differences in innovation performance and effort by country, sector, and key firm characteristics, such as being a multinational or exporter, are explored. Those firms in LAC that are top R&D performers are identified, and the analysis closes with an exploration of firm characteristics that strongly correlate with the probability of being a top R&D performer in the region.

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Notes

  1. The Enterprise Survey is firm-level survey collected in more than 135 countries by the World Bank. This paper focuses on data for the 30 LAC countries. For more details, see the Technical Appendix.

  2. In this paper, the term “product innovation” refers strictly to firms that introduced a new or significantly improved product that is new to the establishment’s market in the last 3 years. “Process innovation” refers strictly to firms that introduced new or significantly improved processes that are new to the industry in the last 3 years. Mohnen and Hall (2013) present in detail the notions of different types of innovation and discuss the way they are measured.

  3. Crespi and Tacsir (2012) present empirical evidence of the impact of process and product innovation on employment growth and composition in sample of Latin American countries.

  4. A clear example is analyzed by Kim et al. (2013), who show that the catching up latecomers in the software industry in China was initially led by handling the publishing (or distributing) of games developed by foreign firms, then imitating them, and even pirating them occasionally.

  5. Table 7, on Technical Appendix, provides descriptive statistics of key performance variables.

  6. All ES data reported in this paper are limited to manufacturers only.

  7. Argentina, Chile, Colombia, Mexico, Peru and Venezuela.

  8. Bolivia, Costa Rica, Dominican Republic, Ecuador, El Salvador, Guatemala, Honduras, Jamaica, Nicaragua, Panama, Paraguay, Trinidad and Tobago and Uruguay.

  9. Antigua and Barbuda, The Bahamas, Barbados, Belize, Dominica, Grenada, Guyana, Saint Kitts and Nevis, Saint Lucia, Saint Vincent and the Grenadines and Suriname.

  10. No data are provided for Brazil because the latest round of Enterprise Surveys from Brazil, in 2009, did not include the innovation module used in 2010.

  11. Firm size is defined by number of employees. Small 5–19 employees, medium 20–99 employees, and large 100 or more employees.

  12. In advanced countries, the role of small firms as agents of radical innovation has recurrently been stressed particularly in the case of emerging technologies (new technological paradigms).

  13. Cases with less than five firms per size category in a country are excluded from averages.

  14. Exporting firms are those that derive at least 10 percent of sales from direct exports.

  15. See Arnold et al. (2008) for a detailed review of the literature.

  16. Unfortunately, we do not have comparable figures for other developing countries.

  17. Estimation performed using a Probit model controlling by country and economic sector (ISIC 3.1. at the two-digit level) and clustering by country and sector groups. A firm is foreign owned if 50 % or more of the shares are owned by non-domestic capital.

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Correspondence to Gustavo Crespi.

Technical Appendix: the enterprise survey

Technical Appendix: the enterprise survey

Characteristics

An Enterprise Survey (ES) is a firm-level survey of a representative sample of an economy’s private sector. The World Bank’s ES has been conducting these surveys since 2000 for key manufacturing and service sectors in every region of the world. The ES cover a broad range of business environment topics including access to finance, corruption, infrastructure, crime, competition, and performance measures.

Enterprise Surveys in Latin America are jointly funded with the Inter-American Development Bank (IDB), and surveys in the Caribbean are jointly funded with IDB and COMPETE Caribbean. It includes the list of following countries: Antigua, Argentina, Bahamas, Barbados, Belize, Bolivia, Brazil, Chile, Colombia, Costa Rica, Dominica, Dominican Republic, Ecuador, El Salvador, Grenada, Guatemala, Guyana, Honduras, Jamaica, Mexico, Nicaragua, Panama, Paraguay, Peru, C, Saint Lucia, Saint Vincent and the Grenadines, Suriname Trinidad and Tobago, Uruguay and Venezuela.

Size, scope and sampling methodology

  • The ES is answered by business owners and top managers.

  • In each country, businesses in the cities/regions of major economic activity are interviewed.

  • Typically 1,200–1,800 interviews are conducted in larger economies, 360 interviews are conducted in medium-sized economies and for smaller economies, 150 interviews are conducted.

  • The manufacturing and services sectors are the primary business sectors of interest. This corresponds to firms classified with ISIC codes 15-37, 45, 50-52, 55, 60-64, and 72 (ISIC Rev.3.1). Services firms include construction, retail, wholesale, hotels, restaurants, transport, storage, communications, and IT.

  • Aimed at formal (registered) companies with 5 or more employees are targeted for interview.

  • Firms with 100 % government/state ownership are not eligible to participate in an ES.

Structure and content of the surveys

  • The Enterprise Surveys Unit uses two instruments: the Manufacturing Questionnaire and the Services Questionnaire.

  • The standard ES topics include firm characteristics, gender participation, access to finance, annual sales, costs of inputs/labor, workforce composition, bribery, licensing, infrastructure, trade, crime, competition, capacity utilization, land and permits, taxation, informality, business-government relations, innovation and technology, and performance measures.

Sampling and weights

The sampling methodology for Enterprise Surveys is stratified random sampling. The strata for ES are firm size, business sector, and geographic region within a country:

  • Firm size levels are 5–19 (small), 20–99 (medium), and 100+ employees (large-sized firms).

  • Sector breakdown is usually manufacturing, retail, and other services. For larger economies, specific manufacturing sub-sectors are selected as additional strata on the basis of employment, value-added, and total number of establishments.

  • Geographic regions within a country are selected based on which cities/regions collectively contain the majority of economic activity.

For further information, please visit the official Enterprise Survey web page: http://www.enterprisesurveys.org.

Descriptive statistics

See Appendix Table 7.

Table 7 Descriptive statistics of key performance and characteristics variables of manufacturing firms

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Crespi, G., Arias-Ortiz, E., Tacsir, E. et al. Innovation for economic performance: the case of Latin American firms. Eurasian Bus Rev 4, 31–50 (2014). https://doi.org/10.1007/s40821-014-0001-1

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Keywords

  • Innovation
  • Research and development
  • Latin America
  • Enterprise surveys