Effect of private and public investment in R&D on innovation in Mexico’s biotechnology firms

Abstract

Purpose In light of the controversy between the theoretical importance of financing biotechnology firms’ research and development (R&D), and the firms’ contradictory and ambivalent empirical results, this paper aims to contribute to the debate by providing empirical evidence from Mexico’s case. Design/methodology/approach The authors use the probit model to determine if firms’ achievements in innovations are related to both private and public financing, and if so, to calculate their marginal effect on the firms’ innovation (n = 40 from 53 firms: 75.5% response). The survey was applied in 2015. Findings Although a large proportion of the firms innovate and dedicate resources to R&D activities, neither private financing (different from the R&D portion of sales) nor public financing has an impact on innovation activity. Research limitations/implications It is necessary to increase the number of studies that corroborate the type of link established between innovations in biotechnology firms and financing. Analyzing the financing/innovation links at various stages of the innovation process would also be relevant. Originality/value The research results support the perspective that the theoretical relationship between the financing and achievements of innovation is not conclusive and point to relevant considerations for the public policy agenda of the case study.