The Returns to Innovation in Latin America: Inexistent or Mismeasured?

Abstract

ABSTRACT The failure to identify the returns to innovation in Latin America within the framework formalized in the CDM model has hampered a thorough comprehension of the phenomenon and hence the design of adequate policies to foster the activity. We here argue that the use of standard innovation output indicators is at the root of the poor performance of empirical models given their inability to properly account for new procedures and for the heterogeneous relevance of innovations. A methodology to build new indices is proposed and their improved comparative performance is shown using 2006 data on Uruguayan firms.