Do Democracy and Government Capacity Positively Contribute to Technological Innovation?

Abstract

Purpose: In this study, we analyze the f ollowing two points based on these existing studies. F irst, we examine the c orrelation between democracy and technological innovation, using cross-national data.We examine whether more democratized countries have an advantage over less democratic c ountries in t erms o f technological i nnovation, and whether d emocratic countries have an advantage over non-democratic countries in terms of innovation performance. we examine how government capabilities affect technological innovation by dividing them into democratic and non-democratic countries. We aim to analyze whether government capacity is important for technological innovation not only in democratic countries but also in non-democratic countries. Research design, data, and methodology: This paper analyzed how political systems, especially democracy and government capacity, affect technological innovation for the period 1997-2017 in 101 countries using data extracted from the World Bank’s World Development Indicators. The relationship between political systems and technological innovation was examined using the Negative Binomial Regression Model (NBRM), which is commonly used to analyze count data with the characteristic of over-dispersion. Results: The findings indicate that as democratization progresses, there is a corresponding increase in innovation performance. Additionally, democratic nations demonstrate higher levels of innovation compared to non-democratic countries. Furthermore, the research reveals that countries with robust government capacity, as measured by factors such as the effectiveness of public officials, provision of public services, regulation and support of the private sector, and corruption control, tend to achieve superior innovation performance. Implications: These f indings support t he a rgument put forth b y Acemoglu a nd R obinson, s uggesting that i n order to a ttain s ustained economic development and innovation, countries require a certain level of government capacity associated with the operation of exploitative economic institutions. The escalating power struggle between the United States and China has now evolved into a technological competition between market democracies and s tate capitalism. Consequently, there i s a f ervent debate regarding which political systems and forms of capitalism have a positive influence on innovation. This study is expected to offer valuable insights and serve as a crucial reference point for this ongoing discourse.