Economic expansion and innovation: A comprehensive analysis of Pakistan’s path to technological excellence

Abstract

To encourage technological and industrial innovation, nations worldwide implement "re-industrialization" and "manufacturing return." This study investigates the relationship between GDP growth, expenditure on research and development, and medium- to high-tech as a percentage of manufactured exports on technological innovation in Pakistan. We evaluated long-run and short-run causal relationships using the ARDL, bound-F test, and ECM regression. The study found a positive relationship between GDP growth and technological innovation in the short and long run. In the short run, with a one-year lag, the analysis reveals a positive and statistically significant relationship between technological innovation, medium-high-tech exports, and GDP growth. In the long run, R&D is positive and significant, while economic growth and technological innovation are positive but not statistically significant. There is a 0.38 percent chance that exogenous shocks will eventually lead to equilibrium in the long run. Based on the findings of this study, it is recommended to allocate resources to research and development, promoting collaborative initiatives, ensuring intellectual property rights, and developing a skilled workforce.