PERUVIAN ECONOMIC ASSOCIATION Innovation in an Unfavorable Context: Local Mining Suppliers in Peru

Traditionally the Peruvian mining sector has been unfavorable for innovation by local suppliers. However, some firms have managed to innovate despite these conditions in recent years. The aim of this paper is to understand the factors and incentives that foster or hinder innovation in such a context. We identify and analyze the mechanisms that lead to innovative activities through the study of the experiences of a group of local suppliers. We pay special attention to the role of interaction between contractors and large mining companies in the framework of Global Value Chain theory, as well as to the way that suppliers take advantage of new opportunities in the sector. Evidence found shows that innovation by local suppliers in the Peruvian mining sector has a limited scope, characterized by three particular traits. First, local suppliers who manage to innovate are mainly incumbent firms whose experience in the market allows them to integrate into the high-tech stages of the production chain. Second, most of these firms maintain close relationships with important national or international companies in the mining industry, which direct innovation efforts through incentives and the transmission of knowledge. Third, the more important innovations seem to be concentrated in specific market niches, where there is less foreign competition because of their specificity to the Peruvian context.