This study empirically investigates the effect of innovation on economic growth using the neoclassical economic growth model. Embarking from the traditional labour growth, physical capital and human capital framework, innovation is postulated to be the main driver for robust economic growth. Using time series techniques, we discover very attention-grabbing findings that highlight the impact of innovation on economic growth for Malaysia. First, the innovation measured by the quantity of a total number of a patent application is statistically insignificant. The result is robust for various innovation measurements, including total local patent application and total foreign patent application. Interestingly, switching to total patent grant instead of a total number of patent application (local or foreign), the empirical result shows a significant impact on economic growth. The finding indirectly reveals the crucial impact of quality innovation rather than the quantity concern. Neglecting both quality and the commercialisation process of these new technologies may not solve the rigidity of knowledgecommercialisation paradox. Finally, we test for the prominent institutional quality in mediating economic growth under a knowledge-based economy. The interaction between institutional quality and the total patent grant has significantly accelerated the role of innovation channel to economic growth. The empirical findings imply that inadequacy of innovative technology flow over the long term has a detrimental effect on national innovative capacity. Thus, the innovation-economic growth nexus needs to be complemented with a good institutional quality framework, skilled human capital and broader networking to commercialise the innovative product to ensure that the innovation activities promote economic growth.
This study examines the extent to which existing foreign direct investment (FDI) theories apply to Chinese investment in the Belt and Road Initiative (BRI) countries. This is important because existing explanations of Chinese outward FDI (OFDI) generally make scant reference to these theories. By using OFDI data for BRI countries between 2003 and 2017, we tested hypothesizes applicable to existing theories by using both pooled ordinary least squares (PLOS) and stochastic frontier analysis (SFA) methods. The results show that a large part of the existing theories apply to Chinese OFDI. Chinese OFDI is likely to choose countries with big market size, abundant natural resources, cheap unskilled labor, stable politics, good infrastructure, high trade cost and high investment cost. These positive findings notwithstanding, they do not invalidate the alternative factors cited by commentators which have not been subject to direct testing, which may require the use of qualitative analytical approaches.
Changes in the oil price directly affect production costs, and subsequently, the general price level of products. With Indonesia observing an inflation targeting policy, this study applies the nonlinear autoregressive distributed lag (NARDL) technique to investigate the effect of oil price fluctuations in Indonesia. The relationship is important for the central bank to gauge the effectiveness of the inflation targeting policy in immunizing the country from oil price fluctuations. Our findings have revealed that there was an asymmetric behavior between oil price and the inflation rate (producer price index), thus questioning the effectiveness of the inflation targeting policy. More specifically, in the long run, an increase in the oil price will tend to lead to an increase in the rate of inflation with a greater deviation, while an oil price reduction will lead to a decrease in the inflation rate with a lower deviation. This suggests that the benefits of an oil price reduction are not passed down to the consumer.
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