We study the interactions between innovation and economic growth in G20 countries over 1961–2019. We establish whether there is a temporal causality between these two variables. Employing the autoregressive distributive lag framework, our results expose a grid of short-run and long-run causal relationships between innovation and growth, including long-run unidirectional causality from innovation to economic growth. Overall, our findings shed light on the real effects of innovation on economic growth.
AcsZ. J., AnselinL., & VargaA. (2002). Patents and innovation counts as measures of regional production of new knowledge. Research Policy, 31(7), 1069–1085.
2.
AghionP., & HowittP. (1996). Research and development in the growth process. Journal of Economic Growth, 1(1), 49–73.
3.
Avila-LopezL. A., LyuC., & Lopez-LeyvaS. (2019). Innovation and growth: Evidence from Latin American countries. Journal of Applied Economics, 22(1), 287–303.
4.
BanerjeeA., DoladoJ. J., GalbraithJ. W., & HendryD. (1993). Co-Integration, error correction, and the econometric analysis of non-stationary data. Oxford University Press.
5.
BurangeL. G., RanadiveR. R., & KarnikN. N. (2019). Trade openness and economic growth nexus: A case study of BRICS. Foreign Trade Review, 54(1), 1–15
6.
CameronG. (1998). Innovation and growth: A survey of the empirical evidence [Working Paper]. Nuffield College, Oxford University.
7.
CetinM. (2013). The Hypothesis of innovation-based economic growth: A causal relationship. International Journal of Economic and Administrative Studies, 6(11), 1–16.
8.
CunninghamB. (2018). Gale researcher guide for: The challenge of development. Cengage Learning-Gale.
9.
DickeyD. A., & FullerW. A. (1979). Distribution of estimators for autoregressive time series with a unit root. Journal of American Statistical Association, 74, 427–431.
10.
ECB. (2017). How does innovation lead to growth? European Central Bank (ECB). https://www.ecb.europa.eu/explainers/tell-me-more/html/growth.en.html.
11.
EngleR. F., & GrangerC. W. J. (1987). Cointegration and error correction: Representation, estimation and testing. Econometrica, 55, 251–276.
12.
FalkM. (2007). R&D spending in the high-tech sector and economic growth. Research in Economics, 61(3), 140–147.
13.
FDA. (2020). Innovation to respond to COVID-19. https://www.fda.gov/emergency-preparedness-and-response/coronavirus-disease-2019-covid-19/innovation-respond-covid-19.
14.
GeissdoerferM., VladimirovaD., & EvansS. (2018). Sustainable business model innovation: A review. Journal of Cleaner Production, 198, 401–416.
15.
GittlemanM., & WolffE. N. (1995). R&D activity and cross-country growth comparisons. Cambridge Journal of Economics, 19, 189–207.
GoelR. K., & RamR. (1994). Research and development expenditures and economic growth: A cross country study. Economic Development and Cultural Change, 42(2), 403–411.
18.
GrilichesZ. (1992). The search for R&D Spillovers. Supplement proceedings of a symposium on productivity concepts and measurement problems: Welfare, quality and productivity in the service industries. Scandinavian Journal of Economics, 94, S29–S47.
19.
GrilichesZ. (1998). Patent statistics as economic indicators: A survey, R&D and productivity: The econometric evidence. In Griliches, Z. (Ed.), R&D and productivity: The econometric evidence volume (pp. 287–343). University Chicago Press.
20.
GrossmanG., & HelpmanE. (1991). Innovation and growth in the global economy. MIT Press.
21.
GrossmanG. M., & HelpmanE. (1990). comparative advantage and long-run economic growth. American Economic Review, 80(4), 796–815.
22.
GulogluB., & TekinR. B. (2012). A panel causality analysis of the relationship among research and development, innovation, and economic growth in high-income OECD countries. Eurasian Economic Review, 2(1), 32–47.
23.
GumusE., & CelikayF. (2015). R&D expenditure and economic growth: new empirical evidence. Journal of Applied Economic Research, 9(3), 205–217.
24.
GurmuS., & Pérez-SebastiánF. (2008). Patents, R&D and lag effects: Evidence from flexible methods for count panel data on manufacturing firms. Empirical Economics, 35(3), 507–526.
25.
HallB. H., GrilichesZ., & HausmanJ. A. (1984). Patents and R&D: Is there a lag?International Economic Review, 27(2), 265–283.
26.
HansenE., & NybakkE. (2018). Response to the global financial crisis: A follow-up study. Journal of Innovation and Entrepreneurship, 7(7), 1–12.
27.
HardyB., & SeverC. (2020). Financial crises and innovation (BIS Working Papers, No. 846). Bank for International Settlements (BIS).
28.
HorvathR. (2011). Research & development and growth: A Bayesian model averaging analysis. Economic Modelling, 28(6), 2669–2673.
29.
HuangH., & XuC. (1999). Institutions, innovations and growth. American Economic Review, 89, 438–443.
30.
IMF. (2018). World Economic Outlook Database.
31.
InekweJ. N. (2015). The contribution of R&D expenditure to economic growth in developing economies. Social Indicators Research, 124(3), 727–745.
32.
KacprzykA., & SwieczewskaI. (2019). Is R&D always growth-enhancing? Empirical evidence from the EU countries. Applied Economics Letters, 26(2), 163–167.
33.
KrammerS. M. S. (2009). Drivers of national innovation in transition: Evidence from a panel of Eastern European countries. Research Policy, 38, 845–860.
34.
LernerJ., & SeruA. (2017). The use and misuse of patent data: Issues for corporate finance and beyond (NBER Working Paper No. w24053). National Bureau of Economic Research.
35.
MaradanaR. P., PradhanR. P., DashS., GauravK., JayakumarM., & ChatterjeeD. (2017). Does innovation promote economic growth? Evidence from European countries. Journal of Innovation and Entrepreneurship, 6, 1–23.
36.
MaradanaR. P., PradhanR.P., DashS., ZakiD., GauravK., JayakumarM., & SarangiA. K. (2019). Innovation and economic growth in European Economic Area countries: The Granger causality approach. IIMB Management Review, 31, 268-282.
37.
NairM., PradhanR. P., & ArvinM. B. (2020). Endogenous Dynamics between R&D, ICT and Economic Growth: Empirical Evidence from the OECD Countries. Technology in Society(forthcoming).
38.
OECD. (2009). Innovation and growth: Chasing a moving frontier.
39.
OECD. (2010). Innovation and the development agenda.
40.
OECD. (2015). Innovation policies for inclusive development, scaling up inclusive innovations.
41.
OECD. (2020). OECD economic outlook.
42.
PesaranM. H., & ShinY. (1998). An autoregressive distributed-lag modelling approach to cointegration analysis. Econometric Society Monographs, 31, 371–413.
43.
PesaranM. H., ShinY., & SmithR. J. (2001). Bounds testing approaches to the analysis of level relationships. Journal of Applied Econometrics, 16, 289–326.
44.
PessoaA. (2010). R&D and economic growth: How strong is the link?Economics Letters, 107, 152–154.
45.
PhillipsP. C. B., & PerronP. (1988). Testing for a unit root in time series regression. Biometrika, 75(2), 335–346.
46.
PorterM. (1992). Capital disadvantage: America’s failing capital investment system. Harvard Business Review, 7, 65–82.
47.
PradhanR. P., NathT., MaradanaR. P., & BurmanS. (2021). Does finance promote innovation: An empirical analysis for OECD countries?Prajnan, 50(1), 53–71.
48.
PradhanR. P., ArvinM. B., & BahmaniS. (2018). Are innovation and financial development causative factors in economic growth? Evidence from a panel Granger causality test. Technological Forecasting & Social Change, 132, 130–142.
49.
PradhanR. P., ArvinM. B., BahmaniS., & BennettS. E. (2017). The innovation- growth link in OECD countries: Could other macroeconomic variables matter?Technology in Society, 51, 113–123.
PradhanR. P., ArvinM. B., NairM., & BennettS. E. (2020a). The dynamics among entrepreneurship, innovation, and economic growth in the Eurozone countries. Journal of Policy Modeling, 42(5), 1106–1122.
52.
PradhanR. P., ArvinM.A., NairM., & BennettS.E. (2020b). Sustainable economic growth in the European Union: The role of ICT, venture capital, and innovation. Review of Financial Economics, 38, 34–62.
53.
PradhanR. P., HallJ. H., GuptaA., NishigakiY., FilhoF., & Du ToitE. (2019). A quantitative assessment of the finance–growth–innovation nexus in EEA countries: Evidence from a multivariate VECM. Journal of East-West Business, 25(2), 225–261.
54.
RomerP. (1990). Endogenous technological change. Journal of Political Economy, 98(5), S71–S102.
55.
RosenbergN. (2004). Innovation and economic growth, OECD 1–6. OECD. https://www.oecd.org/cfe/tourism/34267902.pdf
56.
SchumpeterJ. A. (1911). The theory of economic development. Harvard University Press.
57.
SilaghiM. I. P., AlexaD., JudeC., & LitanC. (2014). Do business and public research and development expenditures contribute to economic growth in Central and Eastern European Countries? A dynamic panel estimation. Economic Modelling, 36(C), 108–119.
58.
SinhaD. (2008). Patents, innovations and economic growth in Japan and South Korea: Evidence from individual country and panel data. Applied Econometrics and International Development, 8(1), 181–188.
59.
Sokolov-MladenovicS., CvetanovicS., & MladenovicI. (2016). R&D expenditure and economic growth: U28 evidence for the period 2002–2012. Economic Research, 29(1), 1005–1020.
60.
SolowR. (1956). A contribution to the theory of economic growth. Quarterly Journal of Economics, 70, 65–94.
61.
SylwesterK. (2001). R&D and economic growth. Knowledge, Technology and Policy, 13(4), 71–84.
62.
TebaldiE., & ElmslieB. (2008). Institutions, innovation and economic growth. Journal of Economic Development, 33, 1–27.
63.
TebaldiE., & ElmslieB. (2013). Does institutional quality impact innovation? Evidence from cross-country patent grant data. Applied Economics, 45(7), 887–900.
64.
UNDP. (2019). Human Development Report, 2019. http://hdr.undp.org/sites/default/files/hdr2019.pdf
65.
WeiY., & LiuX. (2006). Productivity spillovers from R&D, exports and FDI in China's manufacturing sector. Journal of International Business Studies, 37(4), 544–557.
66.
World Bank Group. (2012). Financing business innovation: A review of external sources of funding for innovative businesses and public policies to support them.
