The Effect of R&D Investments and Patents on the Financial Performance of Latin American Firms

This paper investigates the influence of internal R&D and patent applications by Latin American firms on firm performance. Patents should have a positive direct influence on performance. Internal R&D, in turn, should have a positive direct and indirect influence (mediated by patents) as R&D generates innovations regardless of whether they are patented or not. A sample of 751 firms from six Latin American countries showed that when performance is measured by turnover growth, internal R&D has a positive influence and patents have a negative influence. Internal R&D also affects patents, showing a negative indirect influence on performance. The discussions that follow seek to explain these unexpected results.