Public support of innovative activity in small and large firms in Mexico

The National Science and Technology Council (CONACYT) was established in 1970 by the Mexican government. CONACYT was formed to promote the scientific development and technological modernization of Mexico through developing high-level human resources, encouraging research projects, and disseminating scientific/technological information. In 2009, CONACYT launched the Innovation Stimulus Program (PEI) to foster enterprises’ innovation activities and to encourage collaboration on innovation activities among firms and between firms and public research institutes and higher education institutions. Based on an analysis of project data from the PEI program over the years 2009 through 2014, we found that large firms are more innovative than small firms. And, firms that are more innovative are those that had prior funded research, collaborated with universities in the funded research project, added new employees during the research project, and faced larger markets for their innovations. Plain English Summary Only a few studies have systematically compared publicly supported innovative behavior between groups of large and small firms within developing countries, and absent from this list is an analysis of Mexico. In this paper, we study research projects funded through Mexico’s Innovation Stimulus Program, and we find that large firms are more innovative than small firms. We also find that firms with previously funded research, that collaborated with universities in the funded research project, that added new employees during the research project, and that faced larger markets for their innovations are more innovative. Thus, the findings in this paper might provide an initial indication about those firms that will have a greater innovation-related response to the public funding to support their research.