Abstract
ABSTRACT The existing studies on innovation extensively focused on such economic factors as foreign direct investment (FDI) inflows, trade openness, and R&D investments. Contrastingly, non-economic factors have received less research attention in the innovation literature. Lousy governance may lead to political and institutional ineffectiveness. Widespread corruption weakens the accountability practices and rule of law and may consequently hamper innovation. Similarly, terrorism deters flows of investment, increases unproductive costs, causes brain drains, decreases R&D investment and entrepreneurial activities and finally inhibits rates of innovation. This study empirically investigates the impacts of governance structure, terrorism, FDI inflows, and trade openness upon innovation in a laggard country: Pakistan. The findings via the ARDL co-integration approach show that lousy governance, terrorism and FDI inflows have adverse impacts on innovation. Trade openness positively influences innovation, but only in the long run. The results across several robust checks remain the same. Policy implications are also discussed.
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