ICT Use, Investments in R&D and Workers’ Training, Firms’ Productivity and Markups: The Case of Ecuadorian Manufacturing

Abstract

We use data from the last Ecuador Economic Census, covering the universe of manufacturing firms, to study the relationship between firms’ R&D and workers’ training investments and ICT use and firms’ productivity and markups. These knowledge-related investments may affect productivity. Moreover, investments in both knowledge and productivity can affect the ability of firms to set prices above marginal costs. Whether R&D and workers’ training investments and ICT are important for productivity and the capacity to set higher markups in developing countries are interesting development policy questions. We find that good business practices, including access to internal capital markets or to external finance, encourage R&D and workers’ training investments, and ICT use. These investments affect positively firms’ productivity and markups. Their influence on markups operates in general through efficiency and prices. Finally, there is evidence about demand conditions to boost knowledge-related investments and markups.