Firms’ Innovation, Constrains and Productivity: the Case of Peru

Based upon a standard Crepon, Duguet and Mairesse (1998), CDM, model and data at firms’ level, this paper analyzes the interrelationship between firms’ science, technology and innovation (STI) activities and their labor productivity in Peru for the year 2004. The effects of some constraints (i.e., investment innovation risks, market structure distortions and financial constraints) on firms’ decision and amount of investment on STI (or STI investment intensity) are also estimated. Subject to data limitations, the analysis suggests that firms’ size is an important factor in their decision to invest upon STI activities. In the same way, firms’ market share is a key factor in the determination of the level of investment on STI. On the other hand, investment risks and financial restriction seem to affect negatively to firms decision and amount of investment on STI respectively. However, their statistical effects vary among the six ISIC branches considered. The effects of market structure or anticompetitive practices were not clear in sign and statistical significance. Regarding the factors that foster innovation outputs or outcomes (such as new products, processes, commercial and organizational innovations) firms STI investment intensity, their degree of cooperation (collaboration) with other entities and the endowment of STI infrastructure are important factors that promote innovation outputs. Finally, although capital-labor ratio and human capital were determinants factors of firms’ labor productivity the effects of innovation outputs on labor productivity were not statistically significant or robust. JEL Classification-JEL: L6, O31