Effects of obstacles to innovation: Are they complementary? lessons of the case of Peru

This paper investigates whether the effects of obstacles to firms' propensity for and intensity of innovation were complementary in Peru, a middle-income developing country, during the period 2009-2011. The tests of complementarity are based on the estimation of two adjusted Crépon-Duguet-Mairesse (CDM) models that relate a firm's decision to invest in science, technology and innovation activities (STI), the innovation process, and labor productivity. The estimations and tests yield four main results. First, there is evidence that the effects of obstacles to innovation are related and some are complementary. Second, firms' size (particularly the largest ones) affects their decision to invest in STI. Third, under the assumption that obstacles are related, the intensity of investment in STI determines firms' innovation outcomes. Lastly, robustness results suggest that human and physical capital and size are the most important factors that affect firms' productivity.