The geographical component in firms’ perception of innovation barriers: the case of Ecuador

Abstract

[Abstract] This is the first study to analyse the contribution of context to firms’ perception of innovation barriers in a single country. Using the Ecuadorian Innovation Survey and multilevel logit models, we study whether the geographical location of Ecuadorian firms makes them more likely to assess three financial, five knowledge and two market barriers as relevant factors hindering their innovation activities. Our results indicate that location in one of Ecuador’s 24 regions has only a subtle effect on perception of barriers. After controlling for internal and sectoral characteristics of firms in each region, we find that only 2%-6% of the dispersion observed for whether a barrier is perceived as relevant is due to regional differences. For financial and knowledge barriers, half of that small geographical component disappears when the model includes regional population density. Based on the latter result, we argue that urban economics arguments can explain the spatial distribution of firms’ perception of innovation barriers in this small developing country. Our results provide a critical reflection to advance the current research agenda on contextual factors affecting innovation.