IDB report reveals that Caribbean companies need more innovation and productivity 

17-05-23

• An analysis using a comprehensive database and recent research sheds light on the opportunities and constraints for Caribbean businesses.

• The report is part of the IDB's quarterly Caribbean Economy series.

According to a new report from the Inter-American Development Bank (IDB), Caribbean governments should focus on policies that facilitate firms' efforts to innovate and improve productivity. Such policies should focus on the constraints expressed by entrepreneurs themselves, through surveys conducted in the Caribbean.

Reflections on Innovation and Productivity as Caribbean Enterprises Emerge from the Pandemic

 addressed the question of whether the Caribbean would return to the long-term slow growth of the pre-pandemic period. To answer this, the Compete Caribbean Partnership Facility, a multi-donor private sector development programme funded by the IDB, the governments of the UK and Canada, and the Caribbean Development Bank, collected firm-level data from nearly 2,000 companies in 13 Caribbean countries.

The report includes a review of past performance in terms of economic growth and productivity. It then describes the Compete Caribbean data and summarises recent research papers analysing those data and research findings. Finally, the country sections draw on the Compete Caribbean database to describe the country-level challenges facing businesses in the Bahamas, Barbados, Guyana, Jamaica, Suriname and Trinidad and Tobago.

Key findings of the report include:

1. Pre-pandemic economic growth performance was relatively poor. In the twenty years prior to the pandemic, the average growth rate was well below the average for low- and middle-income countries. The average growth gap ranged from two to five percentage points. Commodity exporters grew faster than tourism-oriented economies, although that advantage faded during the second decade of the century. Behind this low growth was the poor performance of aggregate measures of productivity.

2. Innovation plays a key role in stimulating productivity, as well as a gender-inclusive dimension. Overall, the evidence shows that while proactive innovation positively affects firm productivity and efficiency, innovations implemented in response to pressing external shocks (such as the COVID-19 pandemic) do not necessarily generate efficiency gains. This knowledge points to the relevance of policies aimed at continuously promoting technological adoption and innovations throughout the business cycle. The evidence also reveals that, although the pandemic shock affected employment in a gender-differentiated manner, policies aimed at limiting female unemployment are not only necessary for equity, but are also effective in improving productivity. The evidence presented shows that companies that effectively mitigated female employment losses were also more successful in limiting productivity losses.

3. Each country's business context faces its own challenges. The country sections of the report use the dataset to document each country's specific productivity challenges. While access to finance and infrastructure challenges (e.g., electricity and telecommunications) are common across countries, the depth of those challenges varies and other country-specific issues arise. Business owners and managers face their own unique challenges, depending on the country, to improve the performance of their businesses, both large and small.

Overall, this report reveals the importance of data and analysis in unlocking the key determinants of productivity and innovation in the region. The book's rich datasets are publicly available here.

"We hope that researchers and policymakers in the Caribbean will take advantage of this database as a regional public good that can improve economic policymaking across the region," said David Rosenblatt, Regional Economic Advisor, IDB Caribbean Department.

About Compete Caribbean

Compete Caribbean Partnership Facility (CCPF) is a multi-donor private sector development program funded by the IDB, the governments of the United Kingdom and Canada, and the Caribbean Development Bank. It provides technical assistance to 13 Caribbean countries to help the Caribbean region increase productivity and the contribution of Caribbean businesses to economic growth.

About the IDB 

The Inter-American Development Bank's mission is to improve lives. Founded in 1959, the IDB is a leading source of long-term financing for economic, social and institutional development in Latin America and the Caribbean. The IDB also conducts cutting-edge research projects and provides policy advice, technical assistance and training to public and private clients throughout the region.