Obstacles to Innovation and Firm Size: A Quantitative Study for Argentina

This study contributes to our understanding of how barriers to innovation affect firms of different size. We review the literature on obstacles to innovation. We found that there is a gap regarding the systematic appraisal of firms’ size as an important characteristic mediating the effect that obstacles have on innovative investment and performance. The relevance of this topic lies in the important role that small and medium enterprises (SMEs) play in the economic structure. In developing countries, in addition, SMEs lag further behind average productivity, so the need for innovation is greater. We use Argentinean survey data for years 2010–12. We use different econometric techniques suitable for our data. We found that obstacles have a negative impact on innovation investment and performance. In terms of size, SMEs’ investment is particularly affected. When the analysis is done by type of obstacles, we found that cost and market obstacles are important barriers for pursuing innovation activities. Knowledge obstacles seem to hamper the intensity of investment in innovation. Cost, market, and knowledge obstacles all limit performance in innovation. In turn, while cost obstacles are generally more deterrent for SMEs, we could not find systematic size difference regarding the effect of other obstacles.