New findings on the Factors Affecting Innovation and Productivity in the Caribbean Supporting A Dynamic Private Sector Driving Prosperity and Growth In the Caribbean Preeya Mohan SALISES Compete Caribbean CELEBRATION & STOCKTAKING EVENT November 21st & 22nd, 2016

Barriers to Innovation and Firm Productivity in the Caribbean

Motivation Innovation barriers prohibit innovation: Only 11% of Caribbean firms engaged in innovative activity (Mohan et al. 2014). Nevertheless little is known about innovation barriers. Identifying innovation barriers and their impact are important for: Designing and implementing policies and incentives for firms to engage in innovation and reduce market failures. Provide valuable information for entrepreneurs and managers when crafting innovation strategies.

Innovation Barriers Firm categories: Innovation barrier categories: Innovators Potential innovators Non-innovators Innovation barrier categories: Finance or cost factors Knowledge Market Policy and regulatory environment

Results % Authors’ compilation using PROTEqIN data.

Results Innovation barriers negatively affect the decision to innovate- cost and market coefficients significant. Innovation barriers negatively affect innovation expenditure- cost and market coefficients significant. Innovation barriers reduce the probability of innovation: Cost barriers reduce innovation by 46% Knowledge barriers reduce innovation by 25% Policy barriers reduce innovation by 34% Innovation barriers do not have a significant impact on labour productivity.

Foreign Direct Investment and Innovation and Productivity in the Caribbean

Motivation FDI is potentially an important channel for innovation and productivity for local firms in host countries. Knowledge transfer and spillover are not an automatic consequence of FDI. Foreign firms are less likely to undertake innovative activity- in the Caribbean and only 25% of innovative firms are foreign owned (Mohan et al. 2014). Significant policy relevance since governments place a lot of effort in attracting FDI: FDI inflows into the Caribbean average 10% of annual GDP.

Results Innovative effort by foreign firms, FDI spillover and foreign influence do not affect firm innovation decision. Innovative effort by foreign firms, FDI spillover and foreign influence do not affect firm innovation expenditure. Innovative effort by foreign firms negatively affects innovation. Foreign influence positively affects innovation. Innovative effort by foreign firms and FDI spillover do not have a significant impact on labour productivity. Foreign influence positively affects labour productivity.

Thank you Preeya.Mohan@sta.uwi.edu