Innovation strategies, process and product innovations and growth: Firm-level evidence from Brazil

Using World Bank ICS 2000–2002 data from Brazilian manufacturing firms, this paper identifies innovation strategies of firms – in particular internal development (“technology make”) and external acquisition (“technology buy)” – and their effect on successful process and product innovations. It subsequently explores the importance of process and product innovations for firm growth. Successful process and product innovations occur mostly through “technology buy” (mostly through the purchase of machinery and equipment), either alone or in combination with a “technology make” strategy. The option of only relying on internal development is less successful. The results on firm growth indicate that innovative performance is an important driver for firm growth. It is particularly the combination of product and process innovations that significantly improves firm growth. Both innovation and growth performance are supported by access to finance. Skills of workforce and management matter, but not necessarily tertiary education levels. The impact of international linkages on innovative and growth performance is mixed.

► Innovation strategies matter for Brazilian manufacturing firms successful process and product innovations occur mostly through embodied technology acquisition.
► The option of only relying on internal development is less performing.
► Innovative performance is important for firm growth in particular the combination of product and process innovations drive growth.