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This paper aims to identify the winning combination of innovation capabilities for selected Brazilian agribusiness firms along different value chain links.

Adopting a quantitative approach, the authors analyzed the relationship between innovation capabilities and innovative performance of 300 agribusiness firms through a multi-regression technique.

The results showed that transaction, management and development capabilities can improve agribusiness firms’ performance in underdeveloped value chains.

For future research, the authors recommend analyzing further links such as traders and retailers to find the innovation capability for the entire agribusiness value chain.

Upstream firms should adopt new management techniques and tools, efficiently using their resources, while downstream firms should absorb and transform new technologies into products and processes.

The authors suggest formulating public policies that propose the recombination of innovation capabilities to organize agribusiness firms and avoid commodity-oriented market dependence.

The literature on agribusiness explains innovation at the chain level, based primarily on scientific advancements rather than on innovation at the firm level. In this sense, this study provides empirical evidence that can help boost innovation in agribusiness firms.

The paper presents a framework – the Dynamic Chain of Innovation – to analyze the dynamics of innovation in agribusiness.

The authors adopt a theoretical review in developing the theoretical framework.

The boundedness of economic agents will not simply be complemented by acquiring any missing asset or resource on the market. In a more complex way, complementarity occurs through collaborative relationships, aimed at developing specific solutions, joint development, special orders, interaction with research institutions, among others.

Given the theoretical nature of the study, it requires further development with empirical data that support the propositions made as future studies.

The dynamic chain of innovation framework starts from the very existence of incomplete economic agents. However, the authors sustain that the incompleteness is the result of bounded innovation capabilities in individual agents. Innovation, rather than emerging from simple market relations, ought to happen from relations established among bounded capabilities of incomplete agents along the chain or within the micro-links as a puzzle. The dynamics of innovation is thus based both on the boundedness and the complementarity of firms.