This review of the Mexican knowledge-based start-up sector was requested by the Mexican authorities, represented by the National Council for Science and Technology (CONACYT). It was carried out by the OECD Directorate for Science, Technology and Industry (DSTI). It is in direct continuation of the review of Mexico’s innovation policy which was published by the OECD in 2009; it updates the innovation review’s diagnostics and deepens its analysis of innovative entrepreneurship. The review was also requested in the context of the LACII (Latin American and Caribbean Countries Initiative on Innovation), a high-level policy dialogue on innovation in Latin America, launched in 2010. Ministers in charge of innovation in Latin American countries met in Guanajuato, Mexico in March 2011 and decided to base their dialogue in the future on background studies analysing the actual experience of Latin American countries with various aspects of innovation policy. Hence this report was commissioned as part of this broader effort to feed into the high-level LACII discussions.

Across the OECD, knowledge-based small and medium-sized enterprises, and more particularly start-up enterprises, are playing a growing role in employment and value creation. Increased attention is being given to the promotion of these enterprises in innovation policies. This introduction sets the framework against which Mexico’s innovation policies and support programmes that impinge upon the dynamism of knowledge-based start-ups can be analysed and recommendations to improve their efficiency can be made.

This chapter reviews how the issue of innovative small and medium-sized enterprises has been addressed in the evolution of Mexico’s S&T policy mix over the last decade. It presents some recent public initiatives of a policy, legal or regulatory nature which, along with private ones, have contributed to the gradual build-up of a fragmented innovative ecosystem that could help broaden the pool of knowledge-based start-ups and ensure their sustainable development. It highlights some of the framework conditions and innovation performance features that may weaken the dynamism of new technology-based firm creation in Mexico.

This chapter reviews the main policies and instruments that support the development of innovative small and medium-sized enterprises and can be used to encourage the creation and expansion of knowledge-based start-ups. It analyses the role and performance of public and private financial institutions as well as that of other intermediary institutions in the development of new technology-based firms. On the basis of interviews conducted with a number of knowledge-based start-ups created in the last five years and with selected higher education institutions the chapter provides some insight into factors that impinge upon the performance of the private and the academic sectors in terms of the creation of knowledgebased start-ups.

This chapter proposes recommendations for strengthening the innovation ecosystem to favour the creation and expansion of knowledge-based start-ups within the general framework of Mexico’s science, technology and innovation (STI) policy. Drawing on examples of good practices in more advanced countries it suggests possible policy initiatives to develop this ecosystem through improved governance mechanisms and more dedicated support instruments. A number of recommendations go beyond the competence of STI policy makers to encompass more general framework conditions and regulatory and taxation issues.