Non-linear dynamics of innovation activities over the business cycles: Empirical evidence from OECD economies

Abstract

This study examines the non-linear and asymmetries of innovation activities in thirty-six OECD countries for the period 1981Q1-2019Q4. The impulse response function and historical decompositions were estimated to check the cyclical property of innovation activities (R&D expenditures, residential patents, non-residential patents, and international collaboration in technology development) during the boom and recessions. The impulse response function provided three important results. First, the results indicated that the R&D expenditures moves pro-cyclically in response to the gross domestic product (GDP), exports, imports, and gross fixed capital formation in both the boom and recession periods. Second, the findings suggested that patents (residential and non-residential) move pro-cyclically in response to GDP, exports, imports, labor force, R&D expenditures, and gross fixed capital formation shocks in the boom and recession periods. Third, variables including, R&D expenditures, GDP, exports, labor force, imports, and gross fixed capital formation shocks significantly affected patents (residential and non-residential) during the boom and recession periods across the sampled OECD states. Fourth, the results also suggested that the international collaboration in technology development moves pro-cyclically in response to GDP, R&D expenditures, exports, imports, labor force, and gross fixed capital formation shocks in the boom and recession periods.