The Interdependence Between Ease of Doing Business, Innovation, and Competitiveness of Nations

Abstract

This study aims to assess whether the ease of doing business can be considered as an alternative path (indirect path) between innovation and competitiveness of nations, improving the understanding of the effect transfer between these two variables. The study used exploratory/confirmatory factor analysis and mediation techniques applied to data from 141 countries contemplated in The Global Competitiveness report 2019 by the WEF and Doing Business report 2019 by the World Bank. The results show the mediator role of ease of doing business in the relationship between innovation and global competitiveness. Innovation improves the competitiveness of nations, but rules and regulations can be a barrier to this relationship. Therefore, ease of doing business is an essential element in improving the relationship between innovation and competitiveness, helping policymakers to focus their efforts on ease of doing business aspects in such a way as to enhance the economic process and support investors to make the most appropriate decisions when choosing the countries in which to invest their resources. Complementarily, the study also contributes by pointing out that the current method of calculating the EDB index may not be the most suitable, since it can distort analysis affecting international investment feasibility studies.