The interaction effects of technological innovation and path-dependent economic growth on countries overall green growth performance

Abstract

There are numerous studies on utilizing a variety of green growth indicators to monitor and assess green growth performance, but there is little research on the influence of a country's green product development on its overall green growth performance. This study uses the concept of the Product Space (PS) network and its main hypothesis of path-dependent economic growth to fill this research gap. The path-dependent economic growth hypothesis argues that countries can grow their economy by increasing the types of products they produce and export, and that these new products should be developed based on countries' existing productive capabilities such as skills, institutions, capital, and technologies. However, recent studies show that countries do not restrict themselves to their existing productive capabilities to develop new products, as they increase human capital endowment and heavily invest in Technological Innovation (TI) to develop new products. The goal of this study is to better understand the relationship between path-dependent economic growth and heavy investment driven growth in the context of green economic performance. We construct a model using Partial Least Square - Structural Equation Modeling (PLS-SEM) to investigate the relation of TI and green product development, based on the path-dependent economic growth hypothesis, on Countries' Overall Green Growth Performance (COGGP). The constructed model uses TI and green product empirical data compiled by the Organization for Economic Cooperation and Development (OECD) of 61 countries, including both OECD and non-OECD members, from 2003 to 2015. This study evaluates three hypotheses: the first hypothesis (H1) is confirmed, suggesting that TI has a positive and significant effect on COGGP; the second hypothesis (H2) is not confirmed, in that the results show that TI has a positive and significant impact on Path-Dependent Green Product Development (PDGPD), which is aligned with the concept of the PS network and its main hypothesis of path-dependent economic growth; the third hypothesis (H3) is confirmed, suggesting that PDGPD has a positive and significant effect on COGGP. The findings of this study provide empirical evidence to support the role of TI and the PS network and its hypothesis of path-dependent economic growth in advancing COGGP. Furthermore, the findings indicate that while TI is a crucial factor that fosters COGGP and PDGPD, it is not enough to enable countries to go beyond their existing productive capabilities to produce new green products; therefore, along with productive capabilities, TI is another factor that countries should consider while developing their policy agendas for producing new green products. Based on these findings, this study proposes some policy actions that can be considered by policy makers and researchers to promote green growth in countries around the world.