Abstract
Previous studies have highlighted technological innovation as a key instrument for economic development. However, although the relationship between innovation and economic growth has been extensively explored, few studies have investigated the impacts of crucial dimensions of innovation on economic growth. This paper presents one of the first empirical attempts to analyze how the “diversity” aspect of technological progress (or innovation) influences economic performance by considering the possible bidirectional causal effects between these two factors. A series of econometric techniques, including a two-stage-least-squares instrumental variable and dynamic autoregressive distributed lag model, are applied on a dataset of 55 countries. The dataset includes patent data from the United States Patent and Trademark Office and combined macroeconomic data from the World Bank’s development indicators and International Monetary Fund’s economic outlook databases. The results show that generally, technological diversity does not directly affect economic growth. By contrast, a negative effect of diversity on GDP per capita is observed in non-high-income countries. This study contributes to the macroeconomics and innovation management literature by providing an integrated empirical application of various popular firm management theories and a well-known endogenous economic growth theory.
Highlights
The innovation–economic performance nexus has long been of significant interest to economists and policymakers
We propose that cross citation is a form of knowledge flow across various technological domains that leads to technological diversification
This study investigates the possibility of a bidirectional cause-effect relationship between technological diversity and economic performance at the national level
Summary
The innovation–economic performance nexus has long been of significant interest to economists and policymakers. Well-known growth theories linking economic performance and innovation include the Schumpeterian growth model (Schumpeter, 1934), Solow–Swan growth model (Solow, 1956; Swan, 1956), and endogenous growth theory Org/licenses/by/4.0/), which permits unrestricted use, distribution, and reproduction in any medium, provided the original author and source are credited. M. Moaniba et al Does reverse causality explains the relationship between economic performance. These pioneering works emphasized the role of technological progress and industrial innovation in driving long-term economic growth (Grossman & Helpman, 1994). With the marked increase in the number of technological breakthroughs in recent years, the world has witnessed a spike in technological diversity
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