R&D participation and firm performance in the Caribbean

Despite the benefits of R&D and the incentives available for such investments in most countries, the Caribbean has one of the lowest rates of R&D investment in the world. One potential reason for this is the financing constraints encountered by most Caribbean firms. Using a Cobb-Douglas production function augmented with innovation input and output variables and data from the LACES and PROTEqIN databases of the Enterprise Surveys and Compete Caribbean respectively, this research examines the extent to which past R&D experience and current innovative activities enhance the performance of manufacturing and service firms. The findings suggest that prior R&D participation contributes significantly to increased productivity levels of manufacturing firms. On the other hand, skillset is very important to the productivity of service enterprises. Furthermore, past R&D involvement increases the probability of innovation, specifically goods/service innovation and marketing improvements.