Frontier academic research in OECD countries: the role of institutional factors

Abstract

This paper examines the effect of frontier academic research on technological development and the way institutional quality influences this impact. Using a dataset that covers 18 OECD countries over the 2003–2017 period, we find that frontier academic research exerts an important influence on total factor productivity. First, frontier academic research induces technological change by directly enhancing production processes and management methods. Second, frontier academic research stimulates industrial innovations, which in turn improves productivity. Regarding the moderating effect of institutional variables on these relationships, we find that positive moderation only exists for some, not all, of the institutional variables. In that case, a higher level of these variables is found to strengthen the way countries reap benefits from frontier academic research and industrial innovation. However, the moderation of institutions is much less clear with the process that turns frontier academic research into industrial innovations.