Startups in a Developing Region: The Case of Brazil's Northeast

Abstract

Brazil's persistent economic volatility highlights the need for Latin American countries to transition from exporting commodities to producing innovative goods and services. Higher- income Brazilian regions like the Southeast have been more successful at this shift than the Northeast, which remains toward the bottom of the World Bank's upper-middle-income range. The goal of my research is to examine how northeastern Brazil can become a more innovative regional economy. One route is to increase high-potential entrepreneurship in cities like Fortaleza, the node linking Brazil to global Internet traffic and the capital of a state that built a 3,000 km fiber optic network to spur innovation. I studied the cases of four high-potential startups to understand the factors that affect their growth and internationalization in the Northeast. To collect my data, I interviewed the founders of each venture as well as consultants and officials who support new firms. In addition to expected barriers like bureaucracy and low foreign language proficiency, I found that the region's oligarchic society impeded the growth of its startups and Brazil's long history of protectionism hindered their internationalization.