Financing constraints and the R&D decision in the Caribbean

ABSTRACTThe Caribbean has one the lowest rates of Research and Development (R&D) investment intensity by firms. This characteristic can limit the growth and sustainability of Caribbean businesses given the role that this type of investment plays in firm growth and competitiveness. Using the World Bank’s Enterprise Survey database, which provides firm-level data on 13 Caribbean nations, this paper evaluates the decision to engage in R&D amongst Caribbean firms. Using cross-sectional regression analysis to estimate R&D models, the results suggest firms that participate in trade, are technologically-inclined and have access to bank financing, are more likely to make the decision to invest in R&D. Small firms, especially those facing financing obstacles, however, are less likely to engage in R&D. Our findings also provide insights into the financing of R&D investment and could be used by policymakers to encourage greater innovation in the region.