Does Reverse Causality Explains the Relationship Between Economic Performance and Technological Diversity?

Abstract

Abstract. Previous studies have highlighted technological innovation as a key instrument for economic development. However, although the relationship between innovation and economic growth has been extensively explored, few studies have investigated the impacts of crucial dimensions of innovation on economic growth. This paper presents one of the first empirical attempts to analyze how the "diversity" aspect of technological progress (or innovation) influences economic performance by considering the possible bidirectional causal effects between these two factors. A series of econometric techniques, including a two-stage-least-squares instrumental variable and dynamic autoregressive distributed lag model, are applied on a dataset of 55 countries. The dataset includes patent data from the United States Patent and Trademark Office and combined macroeconomic data from the World Bank's development indicators and International Monetary Fund's economic outlook databases. The results show that generally, technological diversity does not directly affect economic growth. By contrast, a negative effect of diversity on GDP per capita is observed in nonhigh-income countries. This study contributes to the macroeconomics and innovation management literature by providing an integrated empirical application of various popular firm management theories and a well-known endogenous economic growth theory.

Scientific Capacity and Industrial Development as Locomotors of International Competitiveness in Latin America

“…A considerable body of literature emphasises the role of scientific capabilities in promoting international competitiveness (An & Iyigun, 2004;Barge-Gil & Modrego, 2009;Czinkota & Pinkwart, 2012;Mok & Kan, 2013). An effective innovation system can create new opportunities for economic growth and productive upgrading (Cooke, 1992;Czinkota & Pinkwart, 2012;Moaniba et al, 2018;Mok & Kan, 2013;Yaşar & Paul, 2011). Such a system requires an expansion in the number of well-trained researchers and scientists (Bodas Freitas, Marques, & Silva, 2013;Cheung, T. W. W. Yuen, C. Y. M. Yuen, & Cheng, 2011;Peña-Vinces & Urbano, 2014), many of which may be attracted from other regions (Furukawa, Shirakawa, & Okuwada, 2012;Kafouros, Wang, Piperopoulos, & Zhang, 2015;Leten, Landoni, & Van Looy, 2014;Tzeng, 2011).…”

“…Upgrading a country's scientific knowledge also demands an expansion in the number of researchers working in R&D (Audretsch et al, 2011;Mok & Kan, 2013;Tzeng, 2011;Yaşar & Paul, 2011). In the end, the sustained economic growth depends upon a country's capability to develop knowledge (Moaniba et al, 2018;Teixeira & Queirós, 2016) that is adaptable and commercialise worldwide (Burger, Karreman, & van Eenennaam, 2015;Liyanage & Mitchell, 1994).…”

“…Better scientific capabilities should result in higher knowledge transfers. They should also lead to new products and processes (Burger et al, 2015) through various channels, including the patenting and licensing of inventions (Jong & Slavova, 2014;Leten et al, 2014;Moaniba et al, 2018), new ventures and university-industry alliances (Barge-Gil & Modrego, 2009;Cooke, 1992;Jong & Slavova, 2014;Kafouros et al, 2015;Leten et al, 2014).…”

“…There are reasons to believe scientific capabilities and manufacturing expansion can reinforce each other. The effective incorporation of new technical knowledge may be more accessible in the manufacturing sector than in others, and productivity growth in that sector can then trigger positive effects in other parts of the economy (Moaniba et al, 2018). Knowledge transfer can also contribute to the creation of new products and processes in manufacturing (Jong & Slavova, 2014;Leten et al, 2014).…”

“…How can countries promote sustainable economic growth and higher international competitiveness? A large body of empirical literature highlights the role of scientific capabilities (Audretsch, Hülsbeck, & Lehmann, 2011;Guerrero, Cunningham, & Urbano, 2015;Moaniba, Su, & Lee, 2018) and calls for higher investment in research and development (R&D). Other authors have emphasised the potential contribution of the manufacturing sector, given its capacity to create more linkages and less volatile demand than other economic activities like agriculture mining (Hall & Lee, 2008;Parteka & Tamberi, 2013;Rehner, Baeza, & Barton, 2014).…”