Many economists agree that innovation is essential for economic growth. But the little we know about firm innovation is based on the study of large, publicly-traded firms in developed countries. As Moisés Naím, editor-in-chief of Foreign Policy magazine, pointed out at the recent Financial and Private Sector Development Forum, large, publicly-traded firms have served as the basis for a lot of formal economic analysis, but they are much less typical of developing countries. This is a problem, since we know from existing studies that small and medium size firms play an important role in developing countries.
What might explain the likelihood of these firms to innovate? Here are some of the key issues that deserve closer scrutiny:
- Are certain types of firms more innovative than others?
- What is the role of finance, governance and competition?
- Is ownership or corporate form important?
- Does foreign competition or trade openness matter?
- And what about the education and experience of managers and workers?