It Is Our Turn to Innovate: Innovation as the Engine of Economic Prosperity in South America

Abstract

The pivotal role of innovation in fostering economic growth is widely acknowledged, with a growing consensus emphasizing its correlation with elevated productivity levels and enhanced competitiveness. Yet, there is limited research exploring potential factors that could boost the positive effects of innovation. This study addressed this fundamental gap in the literature by exploring whether financial development factors (private credit, bank assets, and interest rate) significantly moderate the effect of innovation on GDP and GDP per capita in South America—a region where this topic has not been widely studied with data on patents and economic growth. Using regression analysis with panel data from 10 South American countries, this study presents empirical evidence that suggests that policies in the region should promote strategic collaborations between governments and financial institutions such as banks with the aim of creating an environment that allows researchers to increase innovation outcomes and that rewards firms and entrepreneurs for innovating and adopting new technologies. Moreover, the findings of this article underscore that it is imperative that South America allocates more resources to innovation, recognizing it as the driving force to fuel economic growth.