Innovation, R&D Investment and Productivity: Uruguayan Manufacturing Firms

58 Pages Posted: 25 Apr 2011

See all articles by Adriana Cassoni

Adriana Cassoni

Universidad de la Republica

Magdalena Ramada-Sarasola

Towers Watson; Innovation & Research Multiplier; ORT University - Uruguay

Date Written: August 2010


Uruguay’s inability to sustain high levels of economic growth cannot be fully explained by external shocks, the prevailing institutional setting or the level of human capital accumulation. Instead, low investment in knowledge capital stands as a most likely explanation. This hypothesis is supported by empirical evidence analyzed in this study. Returns on innovation were found to be significant, promoting a non-negligible acceleration of labor productivity gains. However, the propensity to innovate and the intensity of the effort expended critically depend on the firm’s already having a high internal efficiency level. As firms’ behavior is differentiated depending on the type of innovation output pursued, the significantly higher frequency of processes relative to product-innovative firms is matched by the larger impact of novel processes with respect to products on labor productivity. However, the degree of novelty of process innovation is significantly inferior to that of product innovation. The research points to inadequate choices of input mixes as the underlying cause. Policy recommendations center on finding adequate channels to generate and disseminate information on the optimal input mixes depending on the type of innovation output sought.

Suggested Citation

Cassoni, Adriana and Ramada-Sarasola, Magdalena, Innovation, R&D Investment and Productivity: Uruguayan Manufacturing Firms (August 2010). IDB Working Paper No. 65, Available at SSRN: or

Adriana Cassoni (Contact Author)

Universidad de la Republica ( email )

Gonzalo Ramirez 1926
Montevideo, 11200

Magdalena Ramada-Sarasola

Towers Watson ( email )

255 Alhambra Circle
Suite 950
Miami, FL 33134
United States
3053428447 (Phone)

Innovation & Research Multiplier ( email )

Luis A. de Herrera 1248 - Of. 369
World Trade Center - III
Montevideo, 11300

ORT University - Uruguay ( email )

Bulevar Espana 2633
Montevideo, 11300

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