Abstract
The main aim of this article is to empirically verify the relationship between research and development (R&D) expenditures, innovation, and economic growth. Based on the correlation analysis, we examine the interdependencies between selected indicators. We have found that countries with an increase in innovation performance over the past years mostly experienced a higher economic growth in the year 2012. Countries with higher research and development expenditures have not only more researchers, but as well more patents registration. Subsequently, the relationship between R&D expenditures and economic growth is examined based on econometric regression model of the panel data. Input data used in the regression covers EU countries between the years 1999 and 2011. Our results suggest the existence of positive effect of lagged R&D expenditures on economic growth in these countries. We have also identified positive impact of the flow of foreign direct investment (FDI) in this model, which could be related to mechanism of technology diffusion across the countries.
Highlights
Economic growth is one of the most important areas of economic research at this time
Based on the correlation analysis, we could not confirm the positive impact of research and development (R&D) expenditure on GDP growth
The endogenous growth model later suggested that technological progress is dependent on the accumulation of knowledge, which should be directly related to R&D sector
Summary
Economic growth is one of the most important areas of economic research at this time. Innovation is one of the key factors leading to such shifting in production possibility. The existence of R&D is a prerequisite for the development of innovative products and services; Uramová, Valach, & Paulik (2003) stated that R&D and investment policies are creating incentives for the new inventions (ideas, processes, etc.), which subsequently lead to its materialized form of “innovations.” But, first, these must be transformed into economic processes through investment. Without sufficient public and private expenditures on research and development, most of the innovations could not be implemented and economic productivity will not be viable. The majority of the new economic growth concepts is based on a considerable extent of the Solow model (Solow, 1957). The functional relationship used in the Solow model can be written as
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