Firm-level innovation, productivity, and efficiency in riskful business environments: A case study of agribusiness in El Salvador

Abstract Agribusinesses contribute 40–70 percent of the total value added in the food value chain of developing countries; however, they remain under-researched. We investigate whether firm-level innovation improves economic performance using World Bank Enterprise Surveys for El Salvador. We extend the Crépon–Duguet–Mairesse model with a selectivity-corrected stochastic frontier and a metafrontier framework. We find that innovation increases potential total sales and reduces the technology gap, but does not improve technical efficiency. This suggests that, without complementary managerial and institutional support—particularly in contexts where insecurity imposes high operational and opportunity costs—the benefits of innovation do not necessarily lead to productivity gains.