Dynamics of Institutional Change Within the Group of Twenty (G20) and the European Union, and an Assessment of Brexit Impact: A Taxonomic Study

Abstract

The research reported in this chapter presents a quantitative framework and computational methods for assessing institutional development through taxonomic study. The Global Innovation Index (GII) data on institutions (used as the secondary data) in the years 2010–2018, which correspond to the European Union and the Group of Twenty (G20) economies, are extracted and analyzed by numerical taxonomy. Thereupon, this study focuses on major advanced and emerging economies, which have joined forces to achieve their goals through targeted planning; aligning their laws, regulations, and rules of games; and conducting harmonious dynamics of institutional change. It should also be noted that the GII presents detailed metrics relevant to the innovation performance of many economies worldwide and, thus, provides appropriately applicable data for innovation-oriented economies regarding their innovation strategies. Its extensive indicators offer a broad and comprehensive perspective on innovation, factoring in infrastructure, education, business sophistication, and political environment. In particular, the institutional indicators, including institutions, political environment, regulatory environment, and business environment, reported by the Global Innovation Index (GII), are used in the numerical taxonomic approach. Subsequently, the analysis employs on six sets of preliminary data, that is, the aforementioned four indicators plus population and GDP per capita. Moreover, the taxonomic analysis is performed in three groups of economies, namely, the G20 economies, the European Union economies including the United Kingdom, and the European Union economies excluding the United Kingdom. In other words, before the occurrence of Brexit, this chapter explores some hypothetical impacts of Brexit on the dynamics of institutional change within the European Union. Furthermore, this chapter ranks the economies under study with respect to institutional development and devises a numerical technique for reference and benchmarking purposes in evaluation and ranking of institutional attributes.