How do firms innovate in Latin America? Identification of innovation strategies and their main adoption determinants

Abstract

The study of innovation in Latin American firms has concentrated almost exclusively on the determinants and impacts of innovation investments and outputs. Less attention has been paid to how firms innovate. This study applies factor and cluster analysis to a unique dataset of harmonized innovation surveys from Argentina, Chile, Colombia, Ecuador, El Salvador, Paraguay, Peru, and Uruguay, to identify the main innovation practices and strategies performed by Latin American firms. Three of the four identified innovation strategies can be linked to results from similar studies using European firm-level data. However, none of these strategies resembles a strong science or research orientation. An approach to "open management" innovation emerges as idiosyncratic for Latin American firms. These innovation strategies are associated with differences in sales growth and labor productivity. The analysis also shows that firm resources and capabilities drive innovation strategy selection.