Effects of innovation on the growth of ecuadorian firms: a quantile analysis

Abstract

This paper analyzes the relationship between firms' innovation and growth measured by sales and labor productivity in Ecuador. The literature on this topic has focused mainly on developed countries. We apply panel data quantile regressions to analyze a sample of 99,872 private limited company and public limited company for the period 2000-2013. Quantile regression allows us to avoid conventional analysis through the study of the average impact for the average company, which can lead to the discovery of phenomena underlying relationships. The results show that firm innovation has a negative on productivity growth. In contrast, there is a positive relationship between innovation and sales growth for firms in some quantiles. These results lead us to establish a series of recommendations aimed at public policy decision-makers. In particular, the support of government entities is important for a company's R&D activities, which contribute to generating profitable intangible assets. This support can be through advice, subsidies, or tax benefits, among others. At the country level, government effort to protect intangible assets is also important, promoting competitive advantages for those companies that actually invest or buy such assets.

Drivers of SME Growth: Quantile Regression Evidence From Developing Countries

“…Product innovation does not affect growth rates in the 0.10th, 0.20th, and 0.30th quantiles that have higher negative growth rates. These results support the findings of the studies of developing markets conducted by Ahn et al (2018) and Simbana-Taipe et al (2018) to a limited extent.…”

“…These results provide partial support for the findings of Barba Navaretti et al (2014) and Reichstein et al (2010). They also do not provide full support for the findings of Trinh and Doan (2018) and Simbana-Taipe et al (2018) in studies of developing markets.…”

“…In a study based on quantile regression analysis, Ahn et al (2018) find that innovation activities have larger positive effects on firm growth for high-growth firms than low-growth firms. On the other hand, Simbana-Taipe et al (2018) find that innovativeness has a negative effect on firm growth in the lower quantiles of the growth distribution and a positive effect in the higher quantiles. They argue that the negative relationship between innovativeness and growth rate in the lower quantiles may be the result of insufficient innovation management by firms in this part of the distribution.…”

“…Among studies of developing countries, Arkolakis et al (2018), Nizaeva and Coskun (2019), and Yang and Tsou (2020) provide evidence that firm age has a negative relationship with growth rate. Trinh and Doan (2018) and Simbana-Taipe et al (2018) show that firm age has a negative effect on firm growth in all quantiles of the growth distribution in their studies of developing markets based on quantile regression.…”

La intensidad de innovación y la competitividad de micro y pequeñas empresas exportadores de artesanía textil

“…De esta manera, pueden aumentar las posibilidades de éxito de manera extraordinaria o se pueden perder recursos más importantes. Las empresas con mayor intensidad de innovación tienen un impacto favorable en el crecimiento, de modo que esto se convierte en una ventaja competitiva sostenible para ofrecer nuevas soluciones de valor agregado en el tiempo (Rodeiro-Pazos et al, 2018;Salunke et al, 2019).…”