Mohan, P eeya; S obl, E ic
Wo king Pape
COVID-19, i m inno a ion s a egy and p oduc ion
e iciency: A s ochas ic on ie analysis o Ca ibbean i ms
IDB Wo king Pape Se ies, No. IDB-WP-1396
P o ided in Coope a ion wi h:
In e -Ame ican De elopmen Bank (IDB), Washing on, DC
Sugges ed Ci a ion: Mohan, P eeya; S obl, E ic (2023) : COVID-19, i m inno a ion s a egy and
p oduc ion e iciency: A s ochas ic on ie analysis o Ca ibbean i ms, IDB Wo king Pape Se ies,
No. IDB-WP-1396, In e -Ame ican De elopmen Bank (IDB), Washing on, DC,
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P epa ed o he In e -Ame ican De elopmen Bank by:
P eeya Mohan
E ic S obl
In e -Ame ican De elopmen Bank
Ins i u ions o De elopmen Sec o
Compe i i eness, Technology, and Inno a ion Di ision
Compe e Ca ibbean Pa ne ship Facili y
Ma ch 2023
Ma ch 2023
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P epa ed o he In e -Ame ican De elopmen Bank by:
P eeya Mohan (Si A hu Lewis Ins i u e o Social and Economic S udies,
Uni e si y o he Wes Indies, S Augus ine)
E ic S obl (Uni e si y o Be n)
In e -Ame ican De elopmen Bank. This wo k is licensed unde a C ea i e Commons IGO 3.0 A ibu ion-
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Ca aloging-in-Publica ion da a p o ided by he
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Felipe He e a Lib a y
Mohan, P eeya.
COVID-19, i m inno a ion s a egy and p oduc ion e iciency: a s ochas ic on ie analysis o ca ibbean i ms /
P eeya Mohan, E ic S obl.
p. cm. — (IDB Wo king Pape s Se ies ; 1396)
Includes bibliog aphic e e ences.
1. Technological inno a ions-Ca ibbean A ea. 2. Business en e p ises-Technological inno a ions-Ca ibbean A ea.
3. Indus ial p oduc i i y-Ca ibbean A ea. 4. Co ona i us in ec ions-Economic aspec s-Ca ibbean A ea.
I. S obl, E ic, 1969- . II. In e -Ame ican De elopmen Bank. Compe i i eness, Technology and Inno a ion Di ision.
III. Ti le. IV. Se ies.
IDB-WP-1396
h p://www.iadb.o g
Copy igh © 2023
P eeya Mohan
E ic S obl
P epa ed o he In e -Ame ican
De elopmen Bank by:
COVID-19, FIRM INNOVATION
STRATEGY AND PRODUCTION
EFFICIENCY
A S ochas ic F on ie
Analysis o Ca ibbean Fi ms
1
CONTENTS
ABSTRACT ..................................................................................................................................................... V
1 INTRODUCTION ................................................................................................................................ 1
2 LITERATURE REVIEW...................................................................................................................... 3
3 COVID-19, INNOVATION AND PRODUCTION EFFICIENCY AND CARIBBEAN FIRMS ......... 5
4 DATA AND METHODOLOGY ........................................................................................................... 7
4.1. Da a ................................................................................................................................................................ 7
4.2. Me hodology ............................................................................................................................................... 8
5 RESULTS............................................................................................................................................. 11
5.1. P oduc ion Func ion ................................................................................................................................... 11
5.2. De e minan s o Technical E iciency ................................................................................................... 12
6 DISCUSSION ...................................................................................................................................... 17
6.1. Policy Implica ions ...................................................................................................................................... 17
6.2. Limi a ions o he s udy ........................................................................................................................... 19
7 CONCLUSIONS .................................................................................................................................. 21
REFERENCES ................................................................................................................................................. 23
iii
3
COVID-19, INNOVATION AND
PRODUCTION EFFICIENCY AND
CARIBBEAN FIRMS
The ole o inno a ion and p oduc i i y in eco-
nomic g ow h is poo ly unde s ood in Ca ib-
bean SIDS, mainly due o a lack o da a on i ms.
The Compe e Ca ibbean Pa ne ship Facili y,
in collabo a ion wi h he In e -Ame ican De el-
opmen Bank and he Wo ld Bank, has made
signi ican s ides in p oducing in e na ionally
compa able, s a is ically ele an da a a he
i m le el. This acili a es empi ical analysis ha
can de e mine wha d i es i m pe o mance
and inno a ion in he egion. The e idence om
his da a indica es ha p e-COVID-19 inno a-
ion and p oduc i i y a e qui e low and, indeed,
a e acu e cons ain s o g ow h and de elop-
men in Ca ibbean SIDS.
Among he i s o such s udies, Rup ah,
Melga ejo, and Sie a (2014) highligh ha he
cha ac e is ics o Ca ibbean businesses a e no
ypically associa ed wi h a dynamic inno a i e
p i a e sec o since hey a e gene ally small,
old, and concen a ed in ou ism and e ail, and
owne ship is p edominan ly local. The s udy
used he La in Ame ican and Ca ibbean En e -
p ise Su ey (LACES) and showed ha Ca ib-
bean i ms pe o med poo ly o e he pe iod
2007–2010 in e ms o sales g ow h, employ-
men g ow h, and p oduc i i y, e en adjus -
ing o lowe a es o g ow h in he egion o e
he pe iod. Ca ibbean businesses ended o be
smalle ( h ee qua e s had ewe han 20 ull-
ime employees), olde (mo e han 20 yea s in
ope a ion), and less in ol ed in o eign ade
han hei small economy coun e pa s. Mo e-
o e , Ca ibbean i ms we e concen a ed in
ou ism and e ail, and owne ship was p edom-
inan ly local.
Mohan, S obl, and Wa son (2016) also used
he LACES da ase o iden i y he ela ionship
be ween p oduc i i y and inno a i e ac i i y
a he i m le el in he Ca ibbean. The indings
show ha inno a i e i ms exhibi ed highe labo
p oduc i i y compa ed o non-inno a i e i ms,
5
and di e ences in i m cha ac e is ics accoun ed
o some o he obse ed di e ences in p oduc-
i i y, such as size, access o public suppo o
inno a ion, owne ship o pa en s, expo beha -
io , o eign owne ship, and coope a ion wi h
o he ins i u ions o p omo ing inno a ion.
Howe e , e en a e allowing o hese di e -
ences, he p oduc i i y mean o inno a i e i ms
was highe and he e was less dispe sion in p o-
duc i i y han o non-inno a i e i ms.
In a ollow up s udy Mohan, S obl, and
Wa son (2017) used he P oduc i i y, Technol-
ogy, Inno a ion (PROTEqIN) su ey o explo e
he impac o ba ie s o inno a ion in he
Ca ibbean. The s udy showed ha he p opo -
ion o i ms ha we e inno a o s was ela i ely
small (26 pe cen o su eyed i ms), bu he e
was a la ge p opo ion o po en ial inno a o s
(59pe cen o su eyed i ms). The s udy also
p o ided empi ical esul s showing ha inanc-
ing and cos , ma ke , knowledge, and policy and
egula ion ba ie s nega i ely a ec ed inno a-
ion, wi h he cos ba ie ha ing he la ges
nega i e impac . Mo eo e , po en ially inno a-
i e i ms expe ienced mo e s ingen ba ie s
han exis ing inno a o s, ega dless o he ba -
ie conside ed.
The e is cu en ly no empi ical esea ch on
COVID-19 ela ed o i m p oduc i i y and inno-
a ion in Ca ibbean SIDS. COVID-19 has none-
heless ans o med he p i a e sec o , be i in
he Ca ibbean o in e na ionally. I has b ough
wi h i a d ama ic educ ion in i m sales and a
educ ion in new ma ke needs. In pa icula , i
has been di icul o mic o and small i ms ha
lack he esou ces o abso b he shock, as well
as o i ms in e ail and ou ism. Acco ding o
he OECD as many as 2.7 million companies in
La in Ame ica and he Ca ibbean a e likely o
close, mos o hem mic o-en e p ises, which
would incu he loss o 8.5 million jobs (OECD
e al. 2020).
Fi ms ha e had o be inno a i e o su i e
du ing he COVID-19 c isis. They ha e had o
change hei ope a ions and economic ac i i-
ies. The use o he in e ne and he adop ion
o digi al echnologies ha e been c i ical o
sus aining con inui y in mos businesses. Busi-
nesses ha e launched new p oduc s and se -
ices and/o adap ed o emo e, elewo king,
and o he lexible ways o wo king, as well as
o i ual mee ings using in o ma ion commu-
nica ions echnology and digi al echnology
(San os, 2020). Howe e , in he Ca ibbean he e
is a huge digi al di ide, no ably a lack o high-
speed b oadband in e ne and a lack o app o-
p ia e digi al skills. Women ha e also been
disp opo ionally a ec ed by he c isis in he
egion, whe he a home o in he p i a e sec o ,
which may place emale owned and managed
i ms a a disad an age. The e has also been a
push o g een g ow h s a egies as economies
seek o ebuild, gi en ha he clima e c isis in
he Ca ibbean equi es u gen a en ion.
6
COVID-19, FIRM INNOVATION STRATEGY AND PRODUCTION EFFICIENCY
4
DATA AND METHODOLOGY
4.1. Da a
Ou da a sou ce is he 2021 IFPG i m-le el da a-
se o he Ca ibbean collec ed by he Compe e
Ca ibbean Pa ne ship Facili y, a mul i-dono
p og am inanced by he In e -Ame ican De el-
opmen Bank, he Uni ed Kingdom’s Fo eign
and Commonweal h De elopmen O ice, he
Ca ibbean De elopmen Bank, and he Go -
e nmen o Canada. This da a is a ep esen a-
i e c oss-sec ional en e p ise su ey co e ing
1,979 i ms ac oss 13 Ca ibbean coun ies (Ba -
bados, Belize, Jamaica, Guyana, Su iname, An i-
gua-Ba buda, Dominica, G enada, S . Ki s and
Ne is, S . Lucia, S . Vincen and he G enadines,
he Bahamas, and T inidad and Tobago) ac oss
all sec o s, and conduc ed in 2020 du ing he
COVID-19 pandemic.2
While he su ey collec ed a as a ay o
in o ma ion ela ed o i m pe o mance, he
s udy he e is ocused on h ee g oups o a i-
ables. The i s se ela es o he ac o s ha
de e mine a i m’s p oduc ion unc ion in o de
o es ima e echnical e iciency. In his ega d,
in o ma ion was used o es ima e echnical
e iciency du ing wo phases, he p e-pandemic
phase and he COVID-19 phase. Fo he o -
me , esponden s we e asked o p o ide in o -
ma ion on o al sales, and he b eakdown o he
cos o inpu s, whe e hese we e g ouped in o
he ne alue o ixed asse s, cos s o labo , and
ou lay on o he inpu s ( aw ma e ials, ene gy,
e c.). Fo he la e , whe e he su ey was
unde aken du ing he pandemic, esponden s
we e asked whe he sales and ou lays on labo
and o he inpu s would be nega i ely a ec ed
by COVID-19, and, i so, by wha pe cen age.
Using his in o ma ion, an ou line o expec ed
sales, labo cos s, and inpu expendi u e du -
ing COVID-19 was d awn up. Since no speci ic
ques ion was aised conce ning he expec ed
e ec on he ne alue o asse s, i was assumed
ha his would be he same as o he p e ious
pe iod.
The second g oup o a iables p ocessed
om he da a se we e hose ela ing o inno-
a ion. In his ega d, en e p ises we e asked
whe he hey had in oduced any gene al
2
Fo u he de ails o he da a collec ion see IDB (2021).
7
inno a ions ela ed o a a ie y o a eas, includ-
ing new goods o se ices, me hods o p o-
duc ion, logis ics, in o ma ion p ocessing and
communica ion, me hods o accoun ing and
adminis a i e ope a ions, business p ac ices,
wo k o ganiza ion, and p omo ion. I he answe
in any o hese cases was a i ma i e, we c ea ed
dummy a iables o indica e as such. The espon-
den s we e also asked i any o hese inno a ions
we e nega i ely a ec ed by he COVID-19 c isis,
and we simila ly c ea ed a ca ego ical a iable
o ep esen his. Businesses we e also asked
whe he hey had in oduced, since he ad en o
COVID-19, any new inno a ion, in any o he ca -
ego ies lis ed abo e, and o his we also gene -
a ed an indica o a iable. A se o ques ions was
also posed wi h ega d o ‘g een’ inno a ions in
he las h ee yea s, whe e hese we e de ined as
inno a ions leading o en i onmen al imp o e-
men s in en ionally o unin en ionally ela ed o
educed ma e ial consump ion, educed ene gy
consump ion, educed CO2 oo p in , less pollu -
ing o haza dous ma e ials, educed soil, wa e ,
noise o ai pollu ion, o ecycled was e, wa e , o
ma e ials. Again, businesses we e asked whe he
such inno a ions we e a ec ed by COVID-19 and
i simila new inno a ions had been in oduced
ollowing he ou b eak. In he same way as o
gene al inno a ions, dummies we e c ea ed
o look a g een inno a ions in he pas , ask-
ing whe he hese inno a ions we e a ec ed by
COVID-19, and i any new inno a ions had been
in oduced since he ou b eak.
The hi d body o in o ma ion ex ac ed
om he Su ey consis s o gene al en e p ise
ea u es ha could pe ain o echnical e i-
ciency, including sha e o he la ges owne /
manage , sha e o o eign owne ship, sha e o
s a e owne ship, whe he he la ges owne /
manage was emale, and he yea s o expe i-
ence o he manage /owne . Names and de -
ini ions o all a iables used in he empi ical
analysis a e p o ided in Tables 1 and 3.
4.2. Me hodology
In he adi ional app oach o p oduc i i y
analysis by non- on ie models, he e is he
assump ion ha all economic agen s a e e i-
cien and p oduc i i y g ow h akes place as a
mo emen o he p oduc ion on ie , i.e., ech-
nical change (Solow, 1957). In he e en o
echnical ine iciency, he es ima ion o echni-
cal p og ess would be biased, and e en in he
absence o ine iciency, he accoun ing es ima-
ion o o al ac o p oduc i i y would be biased
i indi iduals do no minimize cos , i.e., exhibi
alloca i e ine iciency. The on ie app oach
accoun s o possible ine icien beha io by
measu ing ine iciency as he po en ial inc ease
in he obse ed alue o p oduc ion agains
he maximum echnically achie able alue
de ined by he p oduc ion on ie (Coelli e al.
2005). To calcula e a i m’s ine iciency a SFA
was employed, ha assumes ha he o m o
he p oduc ion unc ion is known and he e-
o e o he pa ame e s o he p oduc ion ech-
nology need o be es ima ed. Impo an ly, SFA
allows o he measu emen o ine iciency and
any ex e nal shocks ou side he con ol o he
i m, such as COVID-19, and which a ec ou pu
le el (Coelli,1996; Coelli e al., 2005; O’Donnell,
Chambe , and Quiggin, 2009; Wadud, 2003).
This was es ima ed as ollows:
lnYi =
b
0 +
b
1ln(Ki) +
b
2ln(Li) +
b
13ln(Mi) +
b
xXi + (Vi – Ui) (1)
whe e: whe e: i = 1,…, N a e he numbe o i ms
in he sample; Yi = sales om i m i; Ki = ne alue
o ixed asses s o i m i; Li = o al expendi u e
on labo o i m i; Mi = o al alue o o he inpu s
i; Xi = ec o o coun y and sec o o ope a-
ion indica o a iables; Vi = e o e m o i m
i; Ui = a non-nega i e andom a iable o i m i,
accoun ing o echnical ine iciency in he p o-
duc ion unc ion.
8
COVID-19, FIRM INNOVATION STRATEGY AND PRODUCTION EFFICIENCY
C ucially, he e o e m in (1) is b oken
down in o wo componen s. The i s e o com-
ponen , Vi, is assumed o ollow a symme ic
dis ibu ion and is he s anda d e o , and he
o he componen , Ui, pinpoin s he i m’s ech-
nical ine iciency and is modelled o ollow an
exponen ial dis ibu ion, he e o e calcula ed
using he mode o i s dis ibu ion. One should
no e ha he a iance o U was allowed o di e
by coun y and sec o o i ms, and ha s an-
da d e o s we e clus e ed a he coun y-sec-
o le el.
The concep o echnical e iciency (TE),
de ined simply as -Ui, was used in all subse-
quen analysis o ease in e p e a ion. Acco d-
ingly, i TE is equal o ze o he i m is de ined
as being echnically e icien and is a i s max-
imum ou pu le el gi en he inpu s used and
echnology a ailable. I TE is less han ze o he
i m is de ined as being echnically ine icien .
Equa ion (1) was es ima ed sepa a ely, in e ms
o i ms’ sales and inpu s o he iscal yea p e-
ceding COVID-19 (TEPC) as well as expec ed
sales and inpu s implemen ed in he wake o
COVID-19 (TEC), p o iding a p e-COVID-19 and
an expec ed COVID-19 ine iciency sco e o
each i m.
To de e mine whe he COVID-19 induced
gene al inno a ions o g een inno a ions a ec -
ing a i m’s e iciency, he ollowing linea model
was es ima ed sepa a ely o TEPC:
TEPC = a0 + a1INNOV +
a2 GREEN + aZZ + ei (2)
whe e: INNOV is an indica o a iable o whe he
he i m in oduced any kind o inno a ion in
he las h ee yea s; GREEN is an indica o a i-
able showing whe he he i m in oduced any
g een inno a ion in he las h ee yea s; and Z
is a ec o o o he po en ial ac o s ela ed o
he echnical e iciency o i ms, as e idenced
by he da a, including p edominan ly emale
owne ship o sha eholde indica o a iable
(FEMALE), pe cen age o o eign owne ship
(FOREIGN), pe cen age o s a e owne ship
(STATE), yea s o expe ience o manage /owne
(EXPERIENCE), an indica o a iable o expo
ac i i y (EXPORT), and pe cen age o owne -
ship o la ges owne (LOWNER). Equa ion (2) is
es ima ed using OLS, clus e ing s anda d e o s
a he coun y-sec o le el. One should no e
ha in his second s age we make he c ucial
assump ion ha he co a ia es included we e
no omi ed a iables co ela ed wi h he inpu s
in Equa ion (1). One should no e ha his may
induce some ine iciency in he es ima es in (1).3
Equa ion (2) was also es ima ed o he
expec ed alues owing o COVID-19, bu se e al
addi ional de e minan s ela ed o he impac o
COVID-19 we e added:
TEPC = a0 + a1 INNOV + a2 GREEN +
a3 INNOVAFF + a4 GREENAFF +
a5 INNOVCOV + a6 GREENCOV +
aZ Z + ai (3)
whe e: INNOVAFF is an indica o a iable de e -
mining whe he an inno a ion implemen ed in
he h ee yea s p io o COVID-19 was a ec ed
by he pandemic; GREENAFF is an indica o a i-
able o de e mine whe he he inno a ion imple-
men ed in he h ee yea s p io o COVID-19 was
a ec ed by he pandemic; INNOVCOV is an indi-
ca o a iable indica ing whe he any inno a ion
was in oduced since he ou b eak o COVID-19;
and GREENCOV is an indica o a iable indica -
ing whe he any such inno a ions we e ‘g een’.
Equa ion (3) is simila ly es ima ed wi h OLS
wi h s anda d e o s clus e ed a he coun y-
sec o le el.
3
We did expe imen wi h es ima ing a model ha speci ies
he mean o he unca ed no mal dis ibu ion in e ms o a
linea unc ion o he inpu s, bu his p oduced abno ma-
lly high s anda d e o s; he implica ion ha all inpu s we e
insigni ican p edic o s o ou pu is likely o be un ealis ic.
9
DATA AND METHODOLOGY
Finally, Equa ion (3) was e-es ima ed, bu in
his ins ance using he di e ence be ween echni-
cal e iciency be o e COVID-19 and he expec ed
echnical e iciency a ising om COVID-19 (DTE)
as he dependen a iable, hus allowing one o
de e mine ac o s associa ed wi h any expec ed
changes in echnical e iciency, as opposed o
jus le els o echnical ine iciency. This means
ha any ixed unobse able emaining in he
echnical ine iciency e ms can be emo ed by
he i s di e ence. Also, concep ually, inno a-
ion is a shi in he p oduc ion unc ion and in
echnical e iciency, so an inno a ion-augmen ed
p oduc ion unc ion is be e es ima ed in i s
di e ence. Gi en he limi ed na u e o ou da a,
ie., ha i is c oss-sec ional and lacks ex ensi e
con ols, i can be a gued ha all es ima ed coe -
icien s a e o be in e p e ed causally.
10
COVID-19, FIRM INNOVATION STRATEGY AND PRODUCTION EFFICIENCY
5
RESULTS
5.1. P oduc ion Func ion
Summa y s a is ics o he a iables used in es i-
ma ing he s ochas ic p oduc ion unc ion, ha
is, Equa ion (1) a e p o ided in Table 1. The
a e age annual sales o he i ms o he is-
cal yea p io o COVID-19 in he sample we e
US$ 2.5million, bu wi h conside able a ia ion,
hin ing a la ge di e ences in i m size ac oss
sec o s and coun ies. Examining he p oduc-
ion unc ion inpu s, on a e age he cos lies
inpu was o he inpu (inpu s o he han capi-
al and labo ), cons i u ing nea ly 52 pe cen o
o al inpu cos s. In con as , he capi al s ock
cos was 35 pe cen , while he cos o labo was
he cheapes , a 13 pe cen . Du ing COVID-19
i ms an icipa ed ha hei ou pu would all
by 23 pe cen on a e age, while he cos s o
labo we e an icipa ed o ise by o e 70 pe -
cen , and he ou lay on o he inpu s was likely o
inc ease ma ginally. As no ed abo e, because o
da a es ic ions he e was an assump ion ha
he alue o he capi al s ock emained con-
s an p io o and du ing COVID-19. A s udy by
Ace edo e al. (2021) using he IFPG da a se
suppo s his whe e i was ound ha app ox-
ima ely 2 pe cen o i ms expec ed condi ions
o wo sen ela ed o wo king capi al o ixed
asse s since he pandemic.
The esul s om es ima ing he s ochas-
ic p oduc ion on ie a e p o ided in Table 2,
whe e Column (1) p o ides he esul s o he
iscal yea p e ious o COVID-19 and Column
(2) esul s du ing COVID-19. All inpu s a e highly
s a is ically signi ican and posi i e. Gi en ha
ou pu and inpu s a e es ima ed in log o m, he
es ima ed coe icien s a e in e p e ed as elas-
ici ies. P io o COVID-19 he elas ici y o o he
inpu (o he han capi al and labo ) was highes ,
a 55 pe cen , ollowed by labo a 45 pe cen
and capi al a 2 pe cen . The es ima ed elas ici-
ies o he expec ed alues o p oduc ion inpu s
unde COVID-19 we e simila o hose om
he p e ious iscal yea (o he inpu - 59 pe -
cen , labo - 36 pe cen , and capi al- 5 pe cen ).
Az- es o each inpu in bo h pe iods could no
ejec he null hypo hesis ha hey a e no s a-
is ically di e en . One should no e ha o bo h
pe iods one could ejec he null hypo hesis o
cons an e u ns o scale.
11
The es ima ed echnical e iciency o he
p oduc ion unc ion o he iscal yea p e i-
ous o COVID-19 and he expec ed alues du -
ing COVID-19, as well as hei di e ence, a e
all shown in Table 2. The a e age echnical
e iciency was –0.0324 in he yea p eceding
COVID-19, and is expec ed o all o –0.0664 due
o COVID-19, ha is, o e 100 pe cen . A - es
con i med ha he all is s a is ically signi ican .
The e is also conside able a ia ion ( h ee imes
he mean) in echnical e iciency ac oss i ms,
in he yea be o e COVID-19 and du ing COVID-
19, as well as he di e ence be ween hese wo.
5.2. De e minan s o Technical
E iciency
Summa y s a is ics o i m inno a i e ac i i y
and he explana o y a iables a ec ing echni-
cal e iciency es ima ed in Equa ions (2) and (3)
a e shown in Table 3. As can be seen, a ound
40 pe cen o i ms ca ied ou some o m o
gene al inno a ion o e he h ee yea s p io o
he pandemic, and almos 50 pe cen unde -
wen some so o g een inno a ion. O hose
implemen ing gene al inno a ion, app oxi-
ma ely 11 pe cen el ha hei inno a ion had
been a ec ed by COVID-19, and ou o hose
i ms conduc ing g een inno a ions, 43 pe cen
conside ed hey had been a ec ed by he pan-
demic. COVID-19 induced a li le o e 11 pe -
cen o i ms o be inno a i e in a gene al sense,
and 17 pe cen in an en i onmen ally iendly
sense. Looking a i m cha ac e is ics, he la g-
es owne ac oss he sample owned abou
12 pe cen o he i m, whe eas o eign and
s a e owne ship we e on a e age 8 and 0.1 pe -
cen , espec i ely. Fi m manage s/owne s had
a ound 21 yea s’ expe ience, and app oxima ely
23 pe cen we e emale. A li le o e a hi d o
i ms did some expo ing.
Resul s o es ima ing Equa ion (2), which
looks a he p e-pandemic pe iod, a e p o ided
in Column (1) o Table 4. Gene al inno a ions
inc eased echnical e iciency. On he o he
hand, g een inno a ions educed echnical e i-
ciency. A - es o he sum o he coe icien s
sugges s ha one canno ejec ha he sum
o he coe icien s is signi ican ly di e en om
ze o. Wi h ega d o non-inno a ion ela ed ac-
o s, only manage /owne ’s expe ience was s a-
is ically signi ican ly associa ed wi h echnical
e iciency o a i m, indica ing ha mo e expe i-
ence leads o lowe echnical e iciency.
Examining he esul s om Equa ion (3),
which ocuses on he pe iod du ing COVID-19,
one inds ha he e is an o e all e iciency-boos -
ing e ec o gene al inno a ion, and ha his
e ec is g ea e i he inno a ion was no a ec ed
by COVID-19 han in he case o hose inno a-
ions aking place in he p e ious iscal yea , and,
mo eo e , signi ican ly so (as sugges ed by a
z- es ). Howe e , o he i ms whe e his inno-
a ion was said o be a ec ed by COVID-19,
he echnical e iciency e ec was signi ican ly
educed. Howe e , a - es sugges s ha e en o
such i ms, an o e all posi i e impac o inno a-
ion on e iciency emains. In con as , he e was
no signi ican e ec om inno a ion unde aken
as a esul o COVID-19. The e was no impac
om g een inno a ion in oduced o e he las
ew yea s, ega dless o whe he i was s a ed o
ha e been a ec ed by COVID-19, o in e ms o
g een inno a ion in oduced in esponse o he
pandemic. In e ms o he non-inno a ion ela ed
a iables, again, only expe ience was a (nega i e)
signi ican p edic o o echnical e iciency. While
he impac o his was somewha g ea e on p e-
dic ed echnical e iciency, a z- es sugges s ha
he di e ence is no s a is ically meaning ul.
The inal eg ession exe cise in ol es using
he change o echnical e iciency as he eg es-
so , con olling o he same ac o s as used in
Equa ion (3). Acco dingly, o he non-inno a-
ion ac o s included in he empi ical model,
only LOWNER was signi ican , sugges ing
12
COVID-19, FIRM INNOVATION STRATEGY AND PRODUCTION EFFICIENCY
Va iables De ini ion Mean S d de Min Max
Y
PC
(US$ million) Sales 2.544 13.34 0.00587 490.8
K
PC
(US$ million) Capi al S ock Value 0.475 1.902 0.000531 49.11
L
PC
(US$ million) Labo Cos 0.193 0.707 2.80e–05 10.82
M
PC
(US$ million) Cos o O he Inpu s 1.317 9.404 0.000470 369.0
Y
C
(US$ million) Sales 1.939 11.22 0.000912 417.2
K
C
(US$ million) Capi al Cos s 0.475 1.902 0.000531 49.11
L
C
(US$ million) Labo Cos 0.330 1.333 3.39e–05 21.78
M
C
(US$ million) Cos o O he Inpu s 1.247 9.408 0.000470 369.0
TE
PC
Technical E iciency –0.0348 0.175 –2.792 0
TE
C
Technical E iciency –0.0518 0.218 –3.571 0
ΔTE TE
PC
-TE
C
–0.0170 0.160 –2.309 0.876
Sou ce: Au ho s’ compila ion based on he IFPG da abase.
TABLE 1
SUMMARY STATISTICS: PRODUCTION FUNCTION
(1) (2)
log(M) 0.551***
(0.0179)
0.585***
(0.0179)
log(K) 0.0194***
(0.00646)
0.0449***
(0.00853)
log(L) 0.454***
(0.0226)
0.360***
(0.0237)
SAMPLE: PRE-COVID-19 COVID-19
Obse a ions 1,883 1,883
Sou ce: Au ho s’ compila ion based on he IFPG da abase.
No es: (i) Coun y-sec o clus e ed s anda d e o s in pa en heses, (ii)***, **, and * indica e 1, 5, and 10 pe cen signi icance le els,
(iii)Coun y and sec o dummies included bu no epo ed, (i ) whe e s
m
is modelled as a unc ion o coun y and sec o dummies.
TABLE 2
TECHNICAL EFFICIENCY ESTIMATION RESULTS
ha he la ge he sha e o he la ges owne ,
he g ea e he inc ease in expec ed echnical
e iciency. As o he expec ed echnical e i-
ciency eg ession in le els, one inds ha gen-
e al inno a ions unde aken in he h ee yea s
p io o he pandemic and ha we e a ec ed by
COVID-19, educed echnical e iciency. Fu he -
mo e, he addi ional inno a ions in oduced due
o COVID-19 also lowe ed echnical e iciency.
I a g een inno a ion was implemen ed p io o
he pandemic and was a ec ed by i , hen his
inc eased expec ed echnical e iciency.
13
RESULTS
Va iables De ini ion Mean S d de Min Max
LOWNER % o la ges owne 12.27 51.84 0 99
FOREIGN % o o eign owne ship 8.482 23.79 0 100
STATE % o s a e owne ship 0.0795 1.783 0 45
EXPERIENCE Expe ience o owne (yea s) 21.25 13.25 1 58
EXPORT Expo incidence 0.364 0.481 0 1
FEMALE Female owne incidence 0.227 0.419 0 1
INNOV Inno a ion incidence be o e COVID-19 0.389 0.488 0 1
INNOVCOV Inno a ion incidence du ing COVID-19 0.119 0.324 0 1
INNOVAFF Inno a ion a ec ed by COVID-19 0.415 0.693 0 4
GREEN G een inno a ion be o e COVID-19 0.497 0.500 0 1
GREENAFF G een inno a ion a ec ed by COVID-19 0.437 0.496 0 1
GREENCOV G een inno a ion du ing COVID-19 0.172 0.377 0 1
Sou ce: Au ho s’ compila ion based on he IFPG da abase.
TABLE 3
SUMMARY STATISTICS – TECHNICAL EFFICIENCY DETERMINANTS
14
COVID-19, FIRM INNOVATION STRATEGY AND PRODUCTION EFFICIENCY
7
CONCLUSIONS
COVID-19 induced a complex global c isis in ha
he i us is as con agious economically as i is
medically. While Ca ibbean coun ies ha e been
exposed o equen ex e nal shocks, in pa icu-
la clima ic e en s, he pandemic is like no o he .
Social dis ancing measu es implemen ed by Go -
e nmen s o sa e li es b ough economic ac i i y
o a nea -s ands ill, a ec ing demand and supply
sides o he alue chain, leading o se e e eco-
nomic con ac ion, and closu e o businesses.
This pape has aimed o con ibu e o a be -
e unde s anding o he COVID-19 pandemic
on Ca ibbean i ms’ pe o mance and inno a-
ion using he IFPG i m-le el da ase and a SFA
amewo k. I has p o ided empi ical e idence on
how he pe sis ence o inno a ion and he ype
o inno a ion (gene al and g een) ha e possi-
bly helped i ms o mi iga e he nega i e e ec s
o he c isis. Ca ibbean i ms ha implemen ed
inno a ions p io o and du ing COVID-19 dem-
ons a ed imp o ed echnical e iciency, com-
pa ed o i ms ha did no , while i ms ha
employed g een inno a ions be o e and du ing
he pandemic did no expe ience a simila boos
in echnical e iciency. The indings a guably ha e
signi ican policy ele ance o he Ca ibbean, as
go e nmen policy aims o de elop he p i a e
sec o by designing and implemen ing app op i-
a e policies and incen i es o i ms o g ow and
engage in inno a i e ac i i y and educe ma ke
ailu es. I also p o ides aluable in o ma ion o
en ep eneu s and manage s when c a ing inno-
a ion s a egy du ing a c isis, such as in oduc-
ing new p oduc s and p ocesses, ma ke ing and
o ganiza ional inno a ions and g een inno a ions
ha may imp o e i m pe o mance.
21
1
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