Innovation, digital adoption, and firm performance in Peru: a quasi-experimental analysis using ENI 2025

This paper estimates the causal impact of innovation activities, digital technology adoption, and public support programs on firm performance using firm-level data from Peru's National Innovation Survey, covering 1,967 manufacturing and knowledge-intensive service firms over the 2022–2024 period. To address endogenous selection into innovation, we implement propensity score matching and estimate average treatment effects on the treated across multiple outcomes–revenues, labor productivity, and digital market engagement–using alternative matching algorithms. Firms engaging in innovation experience substantial gains, with revenues 19–39% and labor productivity 14–28% higher than comparable firms. AI adoption raises the probability of online sales by 13–15 percentage points and digital revenue share by 4–5 percentage points, while also improving productivity. In contrast, government support effects are less robust and sensitive to matching specifications, consistent with programs targeting lower-performing firms rather than generating immediate gains. Overall, the findings highlight the central role of advanced digital technologies in shaping firm heterogeneity in emerging economies, and suggest that AI operates as a substitute for–rather than a complement to–pre-existing digital infrastructure, refining the absorptive-capacity framework for infrastructure-constrained settings.