The influence of non-R&D channels on innovation in a developing economy: an empirical analysis in the context of India

Abstract

ABSTRACT This study investigates the capability of innovation in India from a neo-Schumpeterian perspective, mainly focusing on the non-R&D aspects. We choose this focus for three reasons: (i) Based on our exploratory analysis, the investigation of innovation needs to go beyond the R&D effort (of manufacturing firms); (ii) R&D outlays alone may not fully explain innovation, particularly in resource-scare transition economies like India; and, (iii) Motivated by the theoretical underpinnings of the neo-Schumpeterian literature highlighting the process of interaction that enable the nurturing of innovation capabilities through national innovation system (NIS). Using Indian data from 1981 to 2017, of the non-R&D aspects of inputs, such as human capital, financial capital as internal factors; openness, FDI, and remittances as external factors. Estimated results from the cointegration analysis indicate that human capital and remittances are significant, but FDI has little impact, and openness (in terms of exports and imports) has an insignificant effect on innovation.