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social sciences
Article
Barriers to Innovations and Innovative Performance of
Companies: A Study from Ecuador
Orly Carvache-Franco 1 , Mauricio Carvache-Franco 2 and Wilmer Carvache-Franco 3, *

1 Facultad de Especialidades Empresariales, Universidad Católica de Santiago de Guayaquil,

Guayaquil 090615, Ecuador; a20147142@pucp.pe
2 Facultad de Turismo y Hotelería, Universidad Espíritu Santo, Samborondón 092301, Ecuador;
silcarfr@alumni.upv.es
3 Facultad de Ciencias Sociales y Humanísticas, Escuela Superior Politécnica del Litoral, ESPOL,
Guayaquil 09015863, Ecuador
* Correspondence: wcarvach@espol.edu.ec; Tel.: +593-980105090

Abstract: This research aimed to examine the relationship between the barriers to the development
of innovation and innovative performance. This is a quantitative, not experimental, cross-sectional
research, and the National Survey of Innovation Activities of Ecuador is used. Bivariate Probit
regression was used to process the data. The results show empirical evidence that Ecuadorian
companies have a great number of barriers to innovation. The main barriers to product innovation
and process innovation are as follows: lack of company funds, high costs of innovation, and lack of
qualified personnel in the company and the country. In addition product innovation is affected by the
lack of market information, and process innovation is affected by the lack of financing from external





 sources, lack of information on technology, and a market dominated by established companies. The
Citation: Carvache-Franco, Orly, research has theoretical implications because it contributes empirical evidence on the relationship
Mauricio Carvache-Franco, and between innovation barriers and innovative performance in developing countries where evidence
Wilmer Carvache-Franco. 2022. is scarce. The research has practical implications because it serves as a basis for forming public
Barriers to Innovations and policies. Business managers and administrators can improve innovative performance by minimizing
Innovative Performance of the impact of the main barriers to innovation.
Companies: A Study from Ecuador.
Social Sciences 11: 63. https:/ Keywords: barriers to innovation; innovative performance; product innovation; process innova-
/doi.org/10.3390/socsci11020063 tion; innovation
Academic Editors: Álvaro Lopes Días
and Mafalda Luísa de Almeida
Serra Patuleia
1. Introduction
Received: 20 December 2021
Accepted: 31 January 2022
In the theories of economic development, technological change and innovation have
Published: 8 February 2022
an important role; thus, in the economic development theory of Schumpeter (Schumpeter
1934), he considers that the fundamental force that causes the processes of transformation of
Publisher’s Note: MDPI stays neutral the production and economic system is technological innovation, which can cause decisive
with regard to jurisdictional claims in
transformations in society and in the economy. Meanwhile, the theory of endogenous
published maps and institutional affil-
economic growth (Romer 1994) considers that an improvement in human capital leads to
iations.
economic growth through new forms of technologies and means of production that can
be created.
The long-term growth of a country is related to technological innovation, so there is
Copyright: © 2022 by the authors.
an endogenous capacity of countries to create technology and growth through knowledge.
Licensee MDPI, Basel, Switzerland. Therefore, government policies, research and development (R&D) and property laws are
This article is an open access article necessary factors to develop knowledge and drive innovation in a country (Romer 1994).
distributed under the terms and Innovation has been explained through the resource-based view of the firm (Penrose
conditions of the Creative Commons 1959; Wernerfelt 1984), which considers that the results that companies obtain are in
Attribution (CC BY) license (https:// relation to the various resources and capabilities that they use in their processes, among
creativecommons.org/licenses/by/ the various resources. Knowledge is considered the most important resource to achieve
4.0/). innovation in companies (Farooq 2018; Grant 1996), and according to the open innovation

Soc. Sci. 2022, 11, 63. https://doi.org/10.3390/socsci11020063 https://www.mdpi.com/journal/socsci

Soc. Sci. 2022, 11, 63 2 of 17

paradigm (Chesbrough and Bogers 2014), companies implement external knowledge search
strategies to complement internal knowledge to increase the flow of knowledge and its
innovative potential.
According to OECD (2018), innovation requires the use of new knowledge or a new
combination of existing knowledge and found that there are several types of innovation:
product innovation, which is a new or improved good or service; in process innovation
implements new processes or significant change processes to existing ones; organizational
innovation; and marketing innovation.
Due to the importance of innovation for companies and the development of coun-
tries, several studies have examined the different factors that influence the innovative
performance of companies, however, very few studies address the study of barriers or
obstacles faced by companies to develop innovation, so there is still a gap in the literature
on the effect of barriers to developing innovation that they have on companies, especially
in developing countries (Pellegrino 2018).
The development of successful innovations in companies depends on a set of factors
such as exploring and incorporating new technologies, implementing new innovation-
oriented practices, mechanisms for the development of new ideas, and mitigating the effect
of the barriers that affect the ability to succeed in innovation (Das et al. 2018), so companies
that place importance on managing barriers to innovation are generally among the most
innovative (Wilches-Ocampo et al. 2020).
Barriers to innovation are the conditions present in an organization or their environ-
ment that hinder the development of innovation (Barrera 2017; Pellegrino 2018). Organi-
zational rigidity and lack of resources become barriers to achieving innovation (Kim and
Park 2018). There are three groups of innovation barriers: (a) cost and financing barriers,
including lack of internal funds, lack of external financing, and high costs for innovation
(D’Este et al. 2012; Pellegrino 2018); (b) knowledge barriers, which includes lack of qualified
personnel, lack of information on technology, lack of access to market information, and
the difficulty in finding cooperation partners for innovation (D’Este et al. 2012; Pellegrino
2018); and (c) market barriers established by dominant companies and uncertainty barriers
regarding the demand of products and services (D’Este et al. 2012; Pellegrino 2018).
In the practice of open innovation, several barriers, restrictions, and limitations to
innovation that the company has can be mitigated or reduced because it is not only limited
to carrying out R&D activities, but the company also develops collaboration with other
organizations, and professionals to be able to access knowledge and skills that they do not
have internally (Chesbrough and Bogers 2014).
Many academics have examined the relationship between the effect of the barriers to
innovation and the innovative performance of companies. Much of the research on barriers
to innovation has found relationship between the firms’ innovation barriers and their
innovative performance (Yen et al. 2019). Different explanations have been given regarding
these positive connections, including the ability to overcome the obstacles presented by the
barriers (Galia and Legros 2004; Mohnen and Röller 2005; Pellegrino 2018). The effects of
financial barriers and market barriers are similarly crucial for developing innovation, so
companies must direct their attention to all types of barriers as they can limit innovation
development (Pellegrino and Savona 2017).
This research aims to examine the relationship between the barriers to the development
of innovation and the innovative performance in Ecuadorian companies using the national
survey of innovation activities 2015 because the evidence on this relationship generally
corresponds to contexts of developed countries, and there is little empirical evidence of
this relationship in developing countries that have another context and where the barriers
to innovation can affect companies differently. The innovation activities survey of Ecuador
is aligned with the Oslo manual (OECD 2018), which includes the guidelines for national
innovation surveys that are used mainly in OECD countries.
The article is structured in the following parts: the introduction section that includes
the review of the literature, the description of the general characteristics of the economy
Soc. Sci. 2022, 11, 63 3 of 17

and companies of Ecuador, and the development of hypotheses. The methodology section
includes the research design, the measures of the variables, and the econometric model.
In the results sections the descriptive results and the results of the regression used are
presented. In the discussion section, the results obtained are discussed with respect to other
existing investigations, and in the conclusions section, the conclusions and the theoretical
and practical implications of the investigation are presented.

1.1. Barriers to High Cost and Financing

Cost and financing barriers, including lack of internal funds, lack of external financ-
ing, and high costs for innovation, and can influence innovations since the company is
limited in the expenses required for R&D and to acquire technologies, or, in turn, very
expensive innovations can be avoided in the company due to the difficulties of financing
and recovering the investment (D’Este et al. 2012; Pellegrino 2018).
Innovation presents economic risks of not recovering the investment when the market
does not respond to the commercialization of innovated products (Leiponen 2012; Leiponen
and Helfat 2010). This problem increases in developing countries, since they have many
financial barriers to find financing for innovation (Zanello et al. 2016). In this way, financial
barriers exert a strong negative effect on companies to invest in innovation (Amara et al.
2016; Ghisetti et al. 2017), which mainly impacts the innovation conception stage and affects
the probability that companies abandon innovation projects (García-Quevedo et al. 2018).
Some companies that have high innovative capacity have found financial barriers but
have managed to overcome these financial barriers and achieve innovation (Hottenrott and
Peters 2012). This is explained because the financial resources that are used in expenses
for innovation activities provide knowledge and develop capabilities in the company, but
innovation can be achieved even with scarce financial resources because it is the product of
the combination of several bodies of knowledge that come from R&D and external sources
of information (Criscuolo et al. 2018; Laursen and Salter 2006). In these cases, companies
have the ability to overcome the obstacles presented by financial barriers (Galia and Legros
2004; Mohnen and Röller 2005; Pellegrino 2018).
Madrid-Guijarro et al. (2009) examined the barriers in Spanish manufacturing small-
and medium-sized enterprises (SMEs) in product, process and management innovation
with the concept that innovation is doing something new or different, and found that cost
and financial barriers are related to product and process innovation but with a different
impact on both types of innovation, which limits the competitiveness and utility of the
company, they also find that cost barriers have a greater impact on small companies than
large companies. In addition, Zhu et al. (2012) examined institution-based barriers to the
innovation of SMEs in new technology-based sectors in China with companies that have
product, service, and process innovations and found that the companies have limited access
to funds, which affects the innovation in these companies.
Demirbas et al. (2011) examined manufacturing SMEs in Turkey from the point
of view of the perception and experience of business owners and found that there are
barriers of high costs and lack of appropriate sources of financing, which impact the
propensity of SME owners to innovate. Barrera (2017) used the 9th National Innovation
Survey of Chile 2015 to examine SMEs that develop product, process, organizational, and
marketing innovation and found that they have barriers to innovation due to the high
costs to develop innovations. Furthermore, Seenaiah and Rath (2017) looked at Indian
manufacturing companies with the aim of examining the impact of innovation barriers on
innovation activities and found high cost of innovation and a lack of appropriate sources of
finance, which affects innovation activities and significantly delays innovation projects in
manufacturing companies. Hvolkova et al. (2019) conducted a study in SMEs in Slovakia
to determine the impact of innovation barriers on innovation activities, and found that a
lack of financing resources was the main barrier for micro and small enterprises, while the
cost of innovation was a barrier for medium-sized enterprises. These barriers affected the
innovation activities of companies.
Soc. Sci. 2022, 11, 63 4 of 17

1.2. Knowledge Factor Barriers

Knowledge barriers include a lack of qualified personnel, a lack of information on
technology, a lack of access to market information, and difficulty in finding cooperation
partners for innovation. These restrict the company’s capacity for innovation because
innovation comes mainly from the knowledge resource and requires skills to manage
knowledge that leads to innovation (D’Este et al. 2012; Pellegrino 2018).
Knowledge is an essential resource to attain innovation (Farooq 2018; Grant 1996).
Companies having limitations in internal R&D seek to increase their innovative potential
through external cooperation and often encounter barriers in absorbing external knowl-
edge (Thomä 2017). Knowledge barriers in developing countries are associated with a
less extensive search for external sources of information (Adeyeye et al. 2018). Innovation
comes from combining a new body of knowledge with an old one in the company and
the internal knowledge with the external knowledge acquired from their connections with
other market players. A company with a lack of qualified personnel, market informa-
tion, or technological information has limitations in combining knowledge and achieving
innovation (Amara et al. 2016).
To manage knowledge, companies require human capital: the know-how, education,
and the learning capacity of the staff (Aleknavičiūtė et al. 2016; McGuirk et al. 2015).
Human capital provides absorptive capacity, which is the capacity to identify the external
knowledge that reaches the company as a result of its interaction with other market actors
(González et al. 2016). Cognitive barriers hinder collaborative innovations, especially in the
supply chain (Skippari et al. 2017).
Companies receive market information primarily from customers and consumers.
Customers provide information about their needs (Pejić Bach et al. 2015) and their experi-
ences with the products (Gu et al. 2016). Cooperation with external market actors such as
customers, suppliers, competitors, and consultants allows for an increasing flow of external
knowledge to the company (Chang and Taylor 2016; Estrada et al. 2016; Kumar et al. 2017).
Cooperation for innovation is a strategic action between organizations that seek reciprocal
incentives and benefits (Arranz et al. 2019). The lack of cooperation has a greater impact on
SMEs due to their limited human and technological resources and knowledge (Strobel and
Kratzer 2017).
Madrid-Guijarro et al. (2009) found barriers to qualified human resources in Span-
ish SMEs. Similarly, Demirbas et al. (2011) found, in their study conducted in Turkey,
that low human resource ratings negatively impact innovation, while Seenaiah and Rath
(2017) found a lack of qualified labor in Indian companies. On the other hand, in a study
performed in Scotland, Freel (2000), encountered that low-skilled human resources are
a significant barrier to innovation. Yen et al. (2019) found that human resources is the
main barrier to innovation in Vietnamese SMEs due to the low level of job qualifications.
Similarly, Pellegrino (2018) found that Spanish companies had restrictions to innovate due
to the qualifications of their staff and that young companies are less affected by the lack of
qualified human resources than older firms.
Knowledge factors correspond to technology, impacting the company’s production
processes and product improvement (Kumar et al. 2017). The lack of information on
technology negatively affects innovative performance since companies do not know the
technologies that can improve their processes, such as production, including the production
plant and the technologies to develop the product (Kumar et al. 2017).
Stankovska et al. (2016) found that SMEs lack information about technology and,
more specifically, about digital channels in the UK. This shortcoming affects companies’
innovative performance, as it prevents firms from progressing or using technology to boost
their processes.

1.3. Market Factor Barriers

The lack of resources and the structure of the market are obstacles especially for new
companies since this restricts them in knowledge, the required organizational skills, and
Soc. Sci. 2022, 11, 63 5 of 17

the experience in the technologies used, while the structure of the market can impose
restrictions in the form of competition, company size, and conditions of appropriability
of innovations (D’Este et al. 2012). These factors can prevent a company from initiating
innovation as well as its deceleration of its innovative process (Pellegrino 2018). Barriers
due to market concentration and the risk of not satisfying demand are factors that prevent
companies from participating in the development of innovations (D’Este et al. 2012).
Market barriers include markets dominated by established companies and uncertainty
in demand for innovative products or services, which are barriers related to the market
structure and demand that can mainly affect companies with less experience or companies
that operate in saturated markets, which restricts companies to finance and develop inno-
vations due to the difficulties in recovering the innovation investment (Pellegrino 2018).
Barrera (2017), in a study implemented in Chilean SMEs, evidenced a lack of informa-
tion about the market, and García-Quevedo et al. (2016) found that the uncertainty of the
demand and a low product demand alter innovation differently. Barrera (2017) found in
Chile that the market is dominated by some established companies, which is an essential
restriction for SMEs to develop innovation.
In general, barriers to innovation negatively affect more small companies than large
firms due to the difficulties in obtaining funds and financing, the scarce qualified human
resources, and the predicaments they face to obtain market information (Barrera 2017). The
lack of qualified personnel and the lack of resources for innovation affect older companies
more than younger businesses (Barrera 2017).

1.4. General Characteristics of the Economy and Companies of Ecuador

Ecuador is a country in South America, it is a dollarized country dependent on the
export of oil and primary products (Ray and Kozameh 2012) with plans for economic
growth and substitution of industrial imports through science and technology strategies
knowledge-based (Purcell et al. 2017). The directory of companies for the year 2015 was
made up of 843,644 companies, and of the 6275 companies that were part of the survey, the
participation by sector corresponds to mining and quarrying companies 3.8%, manufactur-
ing 25.8%, service 40%, and trade 30.4% (INEC 2016b). The main manufactures present in
the sample correspond to food products, wearing apparel, rubber and plastics products,
manufactured metal products, and chemical products. In the mining and quarrying sector,
the companies are mainly involved in extraction of metallic ores and extraction of crude
oil and natural gas. In the services sector, the companies mainly corresponds to those
in building construction, food and beverage services, accommodation services, financial
services, and real estate services. Finally, in the trade sector, companies are mainly car and
motor trade, wholesale, and retail trade companies.
Ecuador has been selected in this study because it is a developing country and for
its economic and business environment at the level of financing, knowledge, and market
for the development and commercialization of innovations. At the level of investment, its
R&D expenses in 2014 was 0.44% of the GDP (World Bank 2019), which is a low level of
investment in R&D compared to developed countries. The educational level of the staff in
the sample was is as follows: doctors PhD 0.20%, master’s degree 1.61%, specialist degree
1.45%, staff with completed higher education 19.99%, technological/technical 5.31%, and
the rest of the staff with a lower level of education (INEC 2016b). The sizes of the companies
in the sample are as follows: small companies 72.41%, medium-sized companies 10.23%,
and large companies 17.36% (INEC 2016b). It is a market where SMEs predominate, and in
the sample, 17.61% of companies were part of business groups and 6% of companies have
located their headquarters outside of Ecuador (INEC 2016b).

1.5. Hypothesis
To propose the hypotheses, the definition of product innovation has been considered
as new or improved goods or services of the company (OECD 2018) without distinguishing
the degree of novelty of the innovation if it is new for the company or the market national
 6% of companies have located their headquarters outside of Ecuador (INEC 2016b).

1.5. Hypothesis
To propose the hypotheses, the definition of product innovation has been
Soc. Sci. 2022, 11, 63 considered as new or improved goods or services of the company (OECD 2018) without 6 of 17
distinguishing the degree of novelty of the innovation if it is new for the company or the
market national or international (radical innovation). Identically, process innovation is
considered
or as new
international or improved
(radical processes
innovation). in the company
Identically, (OECD 2018).
process innovation is considered as new
It is considered to examine both product
or improved processes in the company (OECD 2018). innovation and process invocation because
the barriers to innovation
It is considered can have
to examine botha different impact on product
product innovation and processand invocation
process innovation
because
(Madrid-Guijarro
the et al. 2009),
barriers to innovation can haveanda different
to achieve product
impact and process
on product innovation,
and process the
innovation
company requiresetdifferent
(Madrid-Guijarro al. 2009),knowledge
and to achieveand product
skills (Ruiz-Pava andinnovation,
and process Forero-Pineda 2018). It
the company
is considered
requires thatknowledge
different the size of and
the skills
company can influence
(Ruiz-Pava the relationships
and Forero-Pineda 2018).of the
It is variables
considered
due to the fact that larger companies can access a greater number of qualified
that the size of the company can influence the relationships of the variables due to the fact personnel
(Díaz-Díaz
that and Saá-Pérez
larger companies 2014; aGu
can access et al.number
greater 2016), ofand the agepersonnel
qualified of the company
(Díaz-Díaz in and
the
De Saá-Pérez
business 2014;
can be Gu et al. 2016),
of influence becauseand the age
older of the company
companies in the business
can accumulate can be of
more knowledge
influence
(Lefebvrebecause older companies can accumulate more knowledge (Lefebvre et al. 2015).
et al. 2015).
Figure 1 shows the relationship
relationship ofof the
the variables
variables identified
identified in
in the
the literature.
literature.

Figure 1.
Figure 1. Relationship of the
Relationship of the variables.
variables.

Considered that knowledge is the main resource to achieve innovation in companies

(Farooq
(Farooq 2018;
2018;Grant
Grant1996),
1996),andandinvestment
investment in in
research
researchandand
development
development (R&D) allows
(R&D) the
allows
company
the companyto develop skills skills
to develop and obtain machinery
and obtain and technologies
machinery necessary
and technologies to achieve
necessary to
innovation in developing countries since, generally in these countries,
achieve innovation in developing countries since, generally in these countries, companies companies acquire
technologies instead of
acquire technologies developing
instead them internally
of developing (Zanello(Zanello
them internally et al. 2016).
et al.Thus,
2016).the lackthe
Thus, of
funds
lack ofinfunds
the company is a limitation
in the company is a tolimitation
financial innovation.
to financial Companies
innovation.not having funds
Companies not
are limited
having fundsin carrying
are limitedoutinR&D and inout
carrying developing
R&D andinnovation.
in developingFinancial barriers
innovation. exert a
Financial
strong
barriersnegative effect on
exert a strong companies
negative inon
effect investing
companiesin innovation
in investing(Amara et al. 2016;
in innovation Ghisetti
(Amara et
et al. 2017). We propose the following hypothesis:
al. 2016; Ghisetti et al. 2017). We propose the following hypothesis:

Hypothesis (H1). The

Hypothesis 11 (H1). lack of
The lack of funds
funds in
in the
the business
business is
is negatively
negatively related
related to
to product
product and
and process
process
innovation in Ecuadorian companies.
innovation in Ecuadorian companies.

Because there are risks in the return on the investment made to develop the inno-
vations (Leiponen 2012; Leiponen and Helfat 2010), external sources of financing such
as government agencies and financial institutions play an important role in financing
innovation when companies have difficulties in allocating internal funds for innovation
(Zhu et al. 2012). The lack of financing from external sources to the company, such as
government agencies and financial institutions in a developing country, is a limitation for
innovation because the company must seek internal financing and assume the economic
risks of innovation. We propose the following hypothesis:

Hypothesis 2 (H2). The lack of financing from external sources is negatively related to product
and process innovation in Ecuadorian companies.
Soc. Sci. 2022, 11, 63 7 of 17

Developing innovation has economic risks (Leiponen 2012; Leiponen and Helfat 2010),
and when innovation is expensive, there is a probability of abandoning the innovation
(García-Quevedo et al. 2018). In developing countries, companies have less propensity to
develop innovation alone and not in collaboration with other companies (Zanello et al. 2016),
so these companies assume all the costs of innovation. We propose the following hypothesis:

Hypothesis 3 (H3). The high innovation costs are negatively related to product and process
innovation in Ecuadorian companies.

Knowledge is the primary resource for innovation (Farooq 2018; Grant 1996). Skilled
workers provide the company with human capital, which is an essential driver of innovation
and provides the absorptive capacity to the company that is necessary to internalize external
knowledge in the company (González et al. 2016). Human capital refers to the processes of
education, training, and career plans to provide skills and abilities. It is a part of intellectual
capital, known as the company’s most relevant intangible asset (Allameh 2018). Developing
countries have a shortage of qualified personnel for innovation (Zanello et al. 2016). We
propose the following hypothesis:

Hypothesis 4 (H4). The lack of qualified personnel in the company is negatively related to product
and process innovation in Ecuadorian companies.

Human capital is a constraint to innovation and companies perceive that unskilled

personnel are a severe obstacle to business activities (Botrić and Božić 2018). Because of this,
when companies do not have qualified personnel, they seek to hire them in the country. We
propose the following hypothesis:

Hypothesis 5 (H5). The lack of qualified personnel in the country is negatively related to product
and process innovation in Ecuadorian companies.

The lack of information on technological advances limits the company’s knowledge of

new technology’s advantages and how to acquire it. So, companies cannot take advantage
of technological advances in their processes and R&D to achieve innovation. Technology
is defined as the set of knowledge and techniques applied in a logical and orderly way,
and knowledge is the primary resource for innovation (Farooq 2018). We propose the
following hypothesis:

Hypothesis 6 (H6). The lack of information on technology is negatively related to product and
process innovation in Ecuadorian companies.

When innovation is carried out using market information, the company obtains knowl-
edge about customer needs (Pejić Bach et al. 2015) and their experience with products
(Gu et al. 2016). With market information, the company can develop the most appropriate
innovation for their customer’s needs. We propose the following hypothesis:

Hypothesis 7 (H7). The lack of information on the market is negatively related to product and
process innovation in Ecuadorian companies.

Internal knowledge and external knowledge are complementary to develop innovation

in the company (Rodriguez et al. 2017), so developing innovation with other players’
cooperation, such as suppliers or competitors, is important because they provide knowledge
about their clients, the supply chain, and the knowledge base to develop innovation. The
difficulty of finding partners to cooperate in innovation limits the company from developing
innovation. We propose the following hypothesis:
Soc. Sci. 2022, 11, 63 8 of 17

Hypothesis 8 (H8). The difficulty in finding cooperation partners is negatively related to product
and process innovation in Ecuadorian companies.

Innovation is an activity that has economic risks (Leiponen 2012; Leiponen and Helfat
2010), and when established companies dominate the market, they could prevent a company
that auspiciously develops product innovation from being commercially successful with
the innovative product. We propose the following hypothesis:

Hypothesis 9 (H9). The market dominated by established companies is negatively related to

product and process innovation in Ecuadorian companies.

Innovation is an activity that has economic risks (Leiponen 2012; Leiponen and Helfat
2010), and the company will try to compensate with the sales of the innovative product.
However, given the uncertainty of the demand for an innovative product in the market, the
company may limit itself to investing and carrying out R&D, thus limiting innovation. We
propose the following hypothesis:

Hypothesis 10 (H10). The uncertainty in the demand for innovative products or services is
negatively related to product and process innovation in Ecuadorian companies this research.

2. Methodology
The design selected is quantitative, cross-sectional, and non-experimental, following
criteria for quantitative designs. This research follows a deductive approach as it derives
from existing theories. The data used come from the 2015 Ecuadorian National Survey
of Innovation Activities, which INEC developed following the Oslo manual criteria. The
sample obtained for the national survey of innovation activities was 7055 companies, and
once the survey was collected, the valid number of surveys was 6275 companies that
belong to the mining and quarrying, manufacturing, services, and construction sectors
(INEC 2016a). The sampling method was stratified by province and by economic sector,
with a 10% error and a confidence level of 90% (INEC 2016a).

2.1. Measurement of the Variables

Two measures of variables were considered for innovative performance, product
innovation, and process innovation. These dependent variables take the value of one
if the company has carried out innovation and take the value of zero if the company
has not executed innovation. The binary dependent variable as a measure of innovative
performance is evidenced in the literature (Demirbas et al. 2011; Leiponen 2012).
The variable barriers to innovation in the survey appear on a 1 to 4 Likert scale,
considering how they affect innovation in the company, being 1 = high, 2 = medium,
3 = low, and 4 = not experienced. A binary variable has been generated for each innovation
barrier that takes the value of 1 from the scale (1 = high, 2 = medium) and takes the value
of 0 from the scale (3 = low and 4 = not experienced) from the 1 to 4 scale recorded in
the survey. Each variable of the barriers was converted into a binary variable (1, 0). As
evidenced in the literature, the process was followed by authors to alleviate potential
measurement errors that might arise from use of a Likert scale (Cohen and Malerba 2001;
Laursen and Salter 2006; Leiponen and Helfat 2010).
For the variable size of the company, the number of workers was considered as a
measure. This criterion has been used in the literature (Díaz-Díaz and De Saá-Pérez 2014;
Gu et al. 2016; Pejić Bach et al. 2015; Robinson and Stubberud 2011). For the variable
seniority of the company, the time the company has been in the business was considered
a measure (Gu et al. 2016; Lefebvre et al. 2015). Table 1 presents the composition of the
variables under study.
Soc. Sci. 2022, 11, 63 9 of 17

Table 1. Variable composition.

Variable Nomenclature Composition Variable Type

1 = There is product innovation;
Product innovation Y1 Binomial
0 = There is no product innovation
1 = There is process innovation;
Process innovation Y2 Binomial
0 = There is no process innovation
1 = There is a lack of funds in the company for
innovation;
Lack of company funds X1 Binomial
0 = There is no lack of funds in the company for
innovation
1 = There is a lack of financing from external sources;
Lack of financing from
X2 0 = There is no lack of financing from external Binomial
external sources
sources
1 = There are high innovation costs;
High innovation costs X3 Binomial
0 = There are no high innovation costs
Lack of qualified personnel in 1 = There is a lack of qualified company personnel;
X4 Binomial
the company 0 = There is no lack of qualified company personnel
1 = There is a lack of qualified personnel in the
Lack of qualified personnel in country;
X5 Binomial
the country 0 = There is no lack of qualified personnel in the
country
Lack of information on 1 = There is a lack of information on technology;
X6 Binomial
technology 0 = There is no lack of information on technology
1 = There is a lack of market information;
Lack of market information X7 Binomial
0 = There is no lack of market information
1 = There is a difficulty in finding cooperation
Difficulty finding partners;
X8 Binomial
cooperation partners 0 = There is no difficulty in finding cooperation
partners
1 = The market is dominated by established
Market dominated by companies;
X9 Binomial
established companies 0 = The market is not dominated by established
companies
1 = There is uncertainty in the demand;
Uncertainty in the demand X10 Binomial
0 = There is no uncertainty in the demand
Size of the company X11 Number of workers Continuous
Seniority of the company X12 Number of years in business Continuous

2.2. Econometric Model

The following econometric model is used for the research, considering two measures,
product innovation, and process innovation. They will be used for innovative performance:

Y1 = β0 + β1 X1 + β2 X2 + β3 X3 + β4 X4 + β5 X5 + β6 X6 + β7 X7 + β8 X8 + β9 X9 + β10 X10 + β11 X11 + β12 X12 + εi (1)

Y2 = β0 + β1 X1 + β2 X2 + β3 X3 + β4 X4 + β5 X5 + β6 X6 + β7 X7 + β8 X8 + β9 X9 + β10 X10 + β11 X11 + β12 X12 + εi (2)

where:
Dependent variables:
Y1 = Product innovation;
Y2 = Process innovation.
Independent variables:
X1 = Lack of funds in the company;
X2 = Lack of financing from external sources;
Soc. Sci. 2022, 11, 63 10 of 17

X3 = High innovation costs;

X4 = Lack of qualified personnel in the company;
X5 = Lack of qualified personnel in the country;
X6 = Lack of information on technology;
X7 = Lack of market information;
X8 = Difficulty finding partners for cooperation;
X9 = Market dominated by established companies;
X10 = Uncertainty in demand for innovative products or services.
Control variables:
X11 = Company size;
X12 = Seniority of the company.
The Bivariate Probit model was selected for processing the data. The Probit model
is appropriate because the dependent variables are binary (1, 0). Using the ordinary least
squares estimators (OLS) when a binary dependent variable exists is not recommended. The
Bivariate Probit model is used because two dependent variables (product innovation and
process innovation), which have the same group of independent variables in common and can
be correlated, are processed simultaneously. There exists in the literature evidence of the use of
the Bivariate Probit model to process the dependent variable product innovation and process
innovation (Criscuolo et al. 2018; Gómez et al. 2016; Ruiz-Pava and Forero-Pineda 2018).

3. Results
In the development of this investigation, the reliability was verified with Cronbach’s
alpha, obtaining a reliable value of 0.843. When processing the existence of endogeneity,
multicollinearity, and heteroscedasticity, we verified the existence of problems. The robust-
ness of the model was validated by using the modern econometric approach. The following
considerations were taken into account: (a) In respect to strong non-multicollinearity, the
VIF (variance inflation factor) test was used, yielding results of a value less than 10, ruling
out multicollinearity problems; (b) the model incorporated robust standard errors to avoid
heteroscedasticity problems. The Stata statistical software, which allows obtaining the
Bivariate Probit regression with robust errors, was used to process data. The correlations
among the variables were also analyzed, verifying that they are less than 0.8. Thus, it was
determined that there is no high correlation among the independent variables.
Table 2 shows the descriptive results of the companies that reported having cost and
financing innovation barriers. Table 3 shows the descriptive results of the companies
identified as having barriers to knowledge factor innovation. Table 4 shows the descriptive
results of the companies presenting barriers to market factor innovation. Table 5 shows the
results of the Bivariate Probit regression performed with robust errors.

Table 2. Companies with innovation barriers: Cost and financing factors (Expressed as a percentage
of the total number of companies that carried out innovation activities or carried out product or
process innovations).

Innovation Barriers: Cost and Financing Factors %

Lack of funds in the company. 59.78%
Lack of financing from external sources. 45.21%
High innovation costs. 61.33%
Soc. Sci. 2022, 11, 63 11 of 17

Table 3. Companies with innovation barriers: Knowledge factors (Expressed as a percentage of the
total number of companies that carried out innovation activities or carried out product or process
innovations).

Innovation Barriers: Knowledge Factors %

Lack of qualified personnel in the company. 50.81%
Lack of qualified personnel in the country. 42.24%
Lack of information on technology. 50.90%
Lack of market information. 49.99%
Difficulty finding partners for cooperation. 34.86%

Table 4. Companies with innovation barriers: Market factors (Expressed as a percentage of the
total number of companies that carried out innovation activities or carried out product or process
innovations).

Innovation Barriers: Market Factors %

Market dominated by established companies. 54.90%
Uncertainty in demand for innovative products or services. 56.81%

Table 5. Regression Results from the Bivariate Probit.

Product Process
Variables Innovation Innovation
Coefficient Coefficient
(Error) (Error)
0.1880876 *** 0.2548544 ***
Lack of funds in the company.
(0.034228) (0.0351948)
−0.0876784 ** −0.1295372 ***
Lack of financing from external sources.
(0.0352625) (0.0382892)
0.2016872 *** 0.6944521 ***
High innovation costs.
(0.0648308) (0.0661728)
0.5365761 *** 0.9346326 ***
Lack of qualified personnel in the company.
(0.0873716) (0.0952594)
Lack of qualified personnel in the country. −0.6139617 *** 0.556819 ***
(0.1038566) (0.116178)
−0.0376503 0.2882179 ***
Lack of information on technology.
(0.0735551) (0.0782597)
−0.1936364 *** −0.0612834
Lack of market information.
(0.075563) (0.0844584)
−0.0646217 −0.1839626 **
Difficulty finding partners for cooperation.
(0.0753547) (0.083821)
−0.0325535 −0.2398122 **
Market dominated by established companies.
(0.0858906) (0.0992136)
0.033355 −0.0654684
Uncertainty in demand.
(0.1021214) (0.1169863)
0.3884464 *** 0.429193 ***
Company size.
(0.0362482) (0.0371567)
0.2504346 *** 0.2116035 ***
Seniority of the company.
(0.0761566) (0.0752724)
−2.18035 *** −2.092372 ***
Constant.
(0.1014355) (0.0986912)
Number of observations 6275
LR chi2(9) 3309.05
Prob > chi2 0.0000
Note: *** p value < 0.01, ** p value < 0.05.
Soc. Sci. 2022, 11, 63 12 of 17

In the following hypotheses are the innovation barriers related to the innovative
performance of the company:
H1 Lack of funds in the company, positively related to product and process innovation;
H2 Lack of financing from external sources is negatively related only to process
innovation;
H3 High innovation costs are positively related to product and process innovation;
H4 Lack of qualified personnel in the company is positively related to product and
process innovation;
H5 Lack of qualified personnel in the country is positively related to product and
process innovation;
H6 Lack of information on technology is positively related only to process innovation;
H7 Lack of market information is positively related only to product innovation;
H8 Difficulty in finding partners is negatively related only to process innovation;
H9 Market dominated by established companies is negatively related only to process
innovation;
H10 is rejected for both product innovation and process innovation.
In the control variables, it is observed that the size and seniority of the company are
positively related to the innovation of products and processes.
The results show that, in Ecuador, there are barriers that are positively related to
the innovative performance of companies, which indicates the ability of the company to
overcome the obstacles presented by the barriers (Galia and Legros 2004; Mohnen and
Röller 2005; Pellegrino 2018), and they are lack of funds in the company, high innovation
costs, lack of qualified personnel in the company, and lack of qualified personnel in the
country related to product and process innovation. There is also lack of information on
technology, which is positively related only to process innovation, and lack of market
information, which is positively related only to product innovation.
The results also show that there is a group of barriers that is negatively related to
innovative performance. The negative relationship of barriers with innovative performance
reduces the company’s innovative potential (Galia and Legros 2004; Mohnen and Röller
2005; Pellegrino 2018), and these barriers are lack of financing from external sources,
difficulty in finding partners, and markets dominated by established companies, related to
process innovation.

4. Discussion
The results show empirical evidence that Ecuadorian companies have many barriers to
innovation in the three types: high-cost innovation and financing barriers, knowledge factor
barriers, and market barriers. This result follows Zanello et al. (2016), who mentioned that
developing countries have difficulties in financing innovations, lack of qualified personnel,
and difficulties in companies for cooperation for innovation.
The positive relationship of the barriers to innovation with innovative performance
indicates the ability of the company to overcome the obstacles presented by the barriers
(Galia and Legros 2004; Mohnen and Röller 2005; Pellegrino 2018) or that companies
have achieved innovation despite the existence of barriers. On the contrary, the negative
relationship of barriers with innovative performance reduces the company’s innovative
potential (Galia and Legros 2004; Mohnen and Röller 2005; Pellegrino 2018).
Regarding barriers to innovation, the positive relationship that exists between the lack
of funds in the company and the high-cost innovation with the innovative performance
indicates that the company, despite the reduction in its innovative potential due to these
financial barriers, overcomes the obstacles presented by the barriers (Galia and Legros 2004;
Mohnen and Röller 2005; Pellegrino 2018). Analyzing the results, it is found that the control
variables size and seniority of the company are related to the innovative performance of
the company. This is explained because large companies develop the ability to combine
internal and external financing, which is crucial to invest in innovation (Nylund et al. 2019);
large companies have greater possibilities to increase innovative performance because they
Soc. Sci. 2022, 11, 63 13 of 17

have more resources and can accumulate knowledge in greater quantity (Díaz-Díaz and De
Saá-Pérez 2014; Gu et al. 2016); and because innovation is achieved mainly by combining
several knowledge bodies that include internally acquired knowledge through R&D and
external knowledge of information sources (Criscuolo et al. 2018; Laursen and Salter 2006).
Although financial barriers restrict R&D and knowledge acquisition, companies acquire the
necessary knowledge to innovate. The negative relationship of the lack of funding sources
from external sources with innovative performance restricts their investment in innovation
and the innovative potential of companies (Amara et al. 2016; Ghisetti et al. 2017).
These financial barriers found in Ecuadorian companies are similar to those identified
in other countries as reported by Madrid-Guijarro et al. (2009) in Spanish SMEs, Zhu
et al. (2012) in China, Seenaiah and Rath (2017) in India, and Hvolkova et al. (2019) in
Slovakia. The results identified that the lack of internal and external financing restricts the
company from investing in research and development (R&D). The positive relationship
between high innovation cost barriers and innovative performance found in Ecuadorian
companies is similar to the results discovered by Demirbas et al. (2011) in Turkey and
Barrera (2017) in Chile. These researchers identified high innovation costs as an important
barrier to innovation development, consistent with Zanello et al. (2016) companies in
developing countries prefer to acquire technology than to develop it internally due to the
costs involved and its appropriability. Funding barriers and high innovation costs are the
most critical barriers that companies face (Barrera 2017), even more so considering that
innovation activity involves risks (Leiponen 2012; Leiponen and Helfat 2010).
Regarding knowledge factor barriers, the lack of qualified personnel limits Ecuadorian
companies in human capital and the absorptive capacity that the company has to absorp the
external knowledge. The lack of qualified personnel restricts the company in its innovative
capacity and, along with financial barriers, is the most important barriers to innovation in
Ecuadorian companies.
The positive relationship of the barriers of lack of qualified personnel in the company
and the country with the innovative performance found in Ecuadorian companies is similar
to results found by other researchers: Madrid-Guijarro et al. (2009), who examined Spanish
SMEs; Demirbas et al. (2011) in their study in Turkey; Freel (2000), who examined industrial
companies in Scotland; Pellegrino (2018) in Spanish companies; and Yen et al. (2019),
who examined Vietnamese companies, found that human resources at a low level of job
qualification is the main barrier to innovation that these companies have.
Regarding market factor barriers, the positive relationship between the barrier of lack
of market information and product innovation found in Ecuadorian companies is similar to
Barrera (2017), who evidenced Chile’s SMEs’ lack of information on the market regarding
information that comes from customers or consumers and information about suppliers.
Innovation comes from the knowledge that a company acquires from its R&D activities.
Interaction with other market players (Farooq 2018) and the lack of information from
customers prevents knowledge from experience with products and consumers’ needs (Pejić
Bach et al. 2015), as well as on customers’ emotions regarding products (Christensen et al.
2017), which is important information for product development and innovation success.
The positive relationship of the barrier to lack of information on technology with the
innovation of processes found in Ecuadorian companies concurs with Stankovska et al.
(2016), they found, in UK SMEs, that the lack of information on technology affects the
company’s innovative performance. Technology, especially that used in production plants
and the technology that comes from suppliers, is an important source of information (Kumar
et al. 2017). When this barrier exists, companies find their innovative potential restricted.
The negative relationship of the barrier of difficulty in finding partners for the process
of innovation in Ecuadorian companies causes the firms to decrease their innovative
potential because the company is limited in external knowledge that can be used for
innovation (Galia and Legros 2004; Mohnen and Röller 2005; Pellegrino 2018). This result
parallels the one obtained by Barrera (2017) in Chile, where it is difficult for SMEs to find
partners for innovation.
Soc. Sci. 2022, 11, 63 14 of 17

The negative relationship between the barrier market dominated by established com-
panies and the innovation process in Ecuadorian companies causes businesses to decrease
their innovative potential due to restrictions in commercializing innovations (Galia and
Legros 2004; Mohnen and Röller 2005; Pellegrino 2018). This result is similar to those
obtained by Barrera (2017) in Chile, who found that the industry concentration dominated
by established companies is an important restriction for SMEs to develop innovation.
Regarding the control variables, both the size and seniority of the company are posi-
tively related to the innovation of products and processes. This relationship implies that
larger companies can have more knowledge to create innovation due to having more
personnel and resources. The same happens with older companies that can compile more
knowledge for innovation.
These results on the barriers to innovation in Ecuadorian companies contribute to
understand the innovation process because companies in developing countries generally
have low innovative potential. The empirical evidence of the barriers contributes to
understanding their impact on the innovation process.

5. Conclusions
The main barriers to product and process innovation found in this research on Ecuado-
rian companies are lack of funds in the company, high costs of innovation, lack of qualified
personnel in the company, and lack of qualified personnel in the country. Product innova-
tion, in addition, is affected by the barrier generated by the lack of market information and
process innovation. Furthermore, it is affected by the lack of external sources of financing,
the lack of information on technology, and the market dominated by established companies.
This study provides empirical evidence, which is scarce in developing countries, on
how barriers impact innovation. This research contributes to close the knowledge gap
and understand the impact of these barriers on innovation in Ecuadorian companies. The
results of this paper are of importance to the academy since the lack of qualified personnel
in innovative companies shows the need to design and direct the offer of education and
training, especially to the fields of innovative companies, so that firms can develop their
innovative potential.
The results also contribute with evidence that high innovation costs, lack of funding
and financing for innovation, and lack of qualified personnel are the most critical barriers to
innovation. Other barriers found in this research, such as the lack of market and technology
information, are also present in the literature. The results of this research differ from
those found in the literature in that, in previous studies, especially those carried out in
developing countries, companies have few barriers to innovation. In contrast, in Ecuador,
many barriers are observed that affect innovation development, and a higher percentage of
innovative companies are affected.
The research has practical implications because its results can serve as a basis for
forming public policies. Business managers and administrators can improve the innovative
performance of their companies by minimizing the impact of the main barriers to innovation
in businesses.
One of the limitations of this research is the temporality with which the study was
carried out. So, it is recommended to implement studies in other developing countries. In
addition, given that the impacts on innovation are seen over time, new longitudinal studies
can provide data to endorse this research’s results.

Author Contributions: Conceptualization, O.C.-F.; Data curation, O.C.-F. and M.C.-F.; Formal anal-
ysis, O.C.-F. and M.C.-F.; Investigation, O.C.-F. and M.C.-F.; Methodology, O.C.-F.; Project admin-
istration, O.C.-F.; Resources, O.C.-F., M.C.-F. and W.C.-F.; Software, O.C.-F.; Supervision, O.C.-F.;
Validation, O.C.-F.; Visualization, O.C.-F. and M.C.-F.; Writing—original draft, O.C.-F., M.C.-F. and
W.C.-F.; Writing—review & editing, O.C.-F., M.C.-F. and W.C.-F. All authors have read and agreed to
the published version of the manuscript.
Funding: This research received no external funding.
Soc. Sci. 2022, 11, 63 15 of 17

Institutional Review Board Statement: Not applicable.

Informed Consent Statement: Not applicable.
Data Availability Statement: Not applicable.
Conflicts of Interest: The authors declare no conflict of interest.

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