The performance of firms in Latin America and the Caribbean: Microeconomic factors and the role of innovation
Matteo Grazzi, Carlo Pietrobelli & Adam Szirmai
#2015-041
The low productivity of Latin American and Caribbean economies has been
acknowledged as a serious problem that calls for detailed analyses and
appropriate and timely responses. However, in addition to macroeconomic
and regulatory factors, productivity depends crucially on microeconomic
aspects and on the specific strategies and decisions of individual
firms. Such microeconomic decisions have been seldom studied in a
quantitative and comparative manner. This paper addresses this gap in
the literature.
The paper presents the results of recent original microeconomic
evidence, showing that innovation significantly influences the
productivity of firms, although to different degrees depending on the
characteristics of the firms. Moreover, the evidence confirms that the
impact of innovation on productivity depends also on additional
complementary assets, such as access and use of ICT and on-the-job
training. Our analysis reveals that these conclusions also hold true for
the Caribbean economies, traditionally understudied. Additional factors
that can influence productivity have also been detected, such the age of
firms, their access to credit and finance, and their participation in
international markets and global value chains. The paper concludes by
stating that a thorough understanding of these complex phenomena and
their interrelations is an essential condition for the design of more
effective public policies.
JEL Classification: D22; O3 O12
Key words: Latin America and Caribbean, Firm Productivity, Research and
Development, Innovation, ICT, Microeconomic factors