Innovation-driven economic growth under global turbulence: how countries strengthen innovation systems to deal with threats

Abstract

ABSTRACTThe role of innovation as a major force of economic growth is not to doubt. Despite this, geopolitical challenges in recent years pose difficulties for countries, especially for those who struggle with lower GDP per-capita, to enhance innovative performance and grow. Building upon the national innovation system concept and using the methodological framework of country-level composite innovation indexes, this paper aims to explore features of innovation systems inherent in lagging economies and their relevance for economic growth. The analysis, based on a panel dataset comprising the Global Innovation Index elementary indicators on 76 countries during 2015–2021, demonstrates the lower initial state, but faster development of innovation system components in lagging economies. Crucial to their growth is the external validation of national innovation efforts, proxied by international trade and foreign investment indicators. In addition, a sustainable economic growth requires balanced and synergetic development of all components and functions. Therefore, bottom-up approaches are needed to sustain further growth of lagging economies, starting with the provision of effective resource allocation, knowledge creation and its diffusion.KEYWORDS: national innovation systemeconomic growthglobal innovation indexcross-country analysislagging economiesSUBJECT CLASSIFICATION CODES: O11O36O47O57P51 AcknowledgementsWe thank the editor and anonymous reviewers for their helpful comments. We also express our gratitude to Dr. Vitaliy Roud (Zagreb School of Economics and Management) for his valuable suggestions on the initial stage of the study.Disclosure statementNo potential conflict of interest was reported by the author(s).Notes1 The World Bank Income Group Classification is yearly revised, which makes it impossible to use the division for the longitudinal analysis. Hence, the authors used alternative approach to classify the countries, applied for e.g. in (Fagerberg, Srholec, and Knell Citation2007).2 The choice of sample median as a threshold to classify countries is dictated by the presence of some outliers in the data that would produce a less balanced sample, in case the sample average was used.3 The ‘oblique' rotation type is preferred over orthogonal rotations such as ‘varimax normalized' rotation, since the latter assumes that the underlying factors are close to be completely uncorrelated, which is a too strong assumption (Fabrigar et al. Citation1999). The scree plot analysis was further conducted in order to define the resulting number of principal components to be retained.4 The model considers both the initial value for the period and the growth rate of the corresponding NIS componentsAdditional informationFundingThe article was prepared within the framework of the Basic Research Program of the HSE University.