Innovation Management Journal

Innovation Management Journal

The Dynamic Effect of Innovation and Economic Growth: Does the level of innovation and per capita income of countries matter

Document Type : Original Article

Author
hassan daliri
Associate Professor of Economics, Department of Management and Economics, Faculty of Humanities and Social Sciences, Golestan University, Gorgan, Iran. H.daliri@gu.ac.ir
10.22034/imj.2025.479560.2854
Abstract
This study aims to explore the reciprocal and dynamic relationship between innovation and economic growth, comparing this phenomenon across four income groups and distinguishing between innovative and traditional economies. To address the research questions, panel data from 107 countries, categorized into six groups, were analyzed over the period from 2013 to 2022. Panel data vector autoregression model is used for estimation. The findings indicate that, first, innovation positively impacts economic growth across all income groups, with the effect being particularly pronounced in middle-income countries. Second, short-term economic growth fosters innovation, and this effect remains relatively consistent across different income groups. The results also reveal that in high-income economies, innovation shocks are the primary drivers of new innovations. However, in economies with lower-than-average income, both democratic and economic growth shocks significantly contribute to the emergence of new innovations. In examining the differences between innovative and traditional economies, the study finds that while innovation has a positive economic impact in innovative economies, its effect in traditional economies is more volatile, sometimes contributing to economic growth. In innovative economies, innovation itself is a major catalyst for further innovations. Conversely, in traditional economies, economic growth shocks and democratic shocks play a more significant role in driving changes in innovation.
Keywords
innovation
economic growth
vector autoregression
creative destruction
Subjects
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  • Receive Date 20 September 2024
  • Revise Date 29 October 2024
  • Accept Date 14 December 2024