Structural and comparative analysis of R&D funding impact on the level of innovation development: The empirical evidence of GII’s leaders and Ukraine

Abstract

The study aims to determine the influence of the R&D expenditure structure funded by different sectors of stakeholders on the level of innovation development. The data sample involves values of GII and R&D expenditure funded by business, government, higher education, private non-profit sectors, and foreign sources for 10 countries – Ukraine and 9 top countries in GII-2022 for 2011–2020. Pearson/Spearman correlation analysis considers time lags to determine the nature and strength of relationships. For GII’s top countries, the relationship with innovation development level is confirmed as direct for funding R&D by business (in 8 from 9 countries), higher education (5 from 7), and foreign sources (5 from 9) with power from moderate to very high and 0-3-year lag. In Ukraine, the direct relationship is for financing by business (very high power and 3-year lag) and foreign sources (high power and 1-year lag). The regression modeling of dependences (Arellano-Bover/Blundell-Bond dynamic model for panel data and linear model for Ukraine) was also applied using STATA 18. In GII’s top countries, increasing the share of R&D expenditures financed by business by 1% contributes to increasing GII’s score by 0.25%, higher education – 2.47%; government, non-profit sector, and foreign sources – decreasing by 0.89%, 1.68% and 0.81% accordingly. In Ukraine, increasing financing R&D by the government by 1% leads to a similar decrease of GII estimate by 0.19% with a 2-year lag, and the business sector – an increase of 0.16% with a 3-year time lag. Vice versa, in Ukraine, R&D expenditures financed by higher education lead to GII’s score decreasing.