Advantage of populous countries in the trends of innovation efficiency

Abstract

A flurry of studies indicates that population size has a positive effect on innovation, however, cross-country empirical evidence remains sparse. In this paper, we add to the literature by investigating the relationship between population size and innovation efficiency at the country level through constructing three relative indexes based on the datasets of patent applications and Research and Development (R&D) investment. Different from previous studies based on absolute innovation indicators, the relative indexes can reflect the core innovation efficiency of economies by excluding the impact from the difference of economic development level, with a view putting all economies into a comparable standard framework. For all of the three relative indexes, their long-term trends show significant correlations with population size, and the economy with a larger population usually has better and stable performance on the trends of innovation efficiency. In addition, we find that there is a critical population size, over which the economy would be more likely to have a spontaneous improvement on innovation efficiency. This study provides direct evidence in supporting the population size advantage on the trends of innovation efficiency at the economy level and provides new insight to understand the rapid development of innovation in a few populous countries.