Research questions
The fact that some countries show higher growth rates than others has long been observed in the global economy. Even within the OECD area, where countries are regarded as being relatively homogeneous, growth levels differ remarkably. This leads inevitably to the question how different growth rates can be reconciled and what factors are responsible for different growth rates. The purpose of this thesis is to examine one of the factors, besides the classical input factors labour and capital, that is often regarded to play a significant role in economic growth namely innovation.
After a theoretical introduction in the first section of this thesis, the second section reviews principal earlier studies about the effect of innovation on economic growth to provide a methodological overview. In section three, research and development (R&D) expenditures (taken as a proxy for innovation) among 15 OECD countries are evaluated in the period 1973 – 1998 to analyse how the technology stock of these countries developed relative to their GDP growth and to answer the question which countries performed relative well with respect to innovation and which countries lag behind. Section four analyses the impact of innovation on economic growth by econometrically testing a neoclassical growth model where innovation is endogenized. The purpose of this econometric analysis is to show how much economic growth can be accounted to innovation when compared to the classical input factors capital and labour. Section five focuses on recent policy actions undertaken in the European Community to support innovation. The section analyses possible policy responses to the innovation phenomenon with respect to the European Community. Section six contains brief concluding remarks.
Table of Contents
1 Introduction
1.1 Research questions
1.2 The Term 'Innovation'
1.3 Theoretical Background
2 Principal Earlier Studies
2.1 Introductory Discussion
2.2 Four Empirical Studies
3 Comparison of Technology Stocks among 15 OECD Countries
3.1 Introduction
3.2 Interpretation
3.3 A European Technology Stock Map
4 Econometric Analysis
4.1 Introduction
4.2 The Model
4.3 Econometric Challenges
4.4 Interpretation
5 Innovation Policies in Europe
5.1 Introduction
5.2 Weaknesses of Europe’s Innovation Activities
5.3 Diversity and Convergence
5.4 Policy Actions Undertaken in Europe
6 Conclusions
Research Objectives and Key Topics
This thesis investigates the role of innovation as a determinant of economic growth, complementing traditional labor and capital inputs. The primary research goal is to empirically evaluate how technology stocks, proxied by R&D expenditures, have influenced GDP growth across 15 OECD countries from 1973 to 1998, while also examining the strategic policy responses developed within the European Community.
- Theoretical foundation of innovation and new growth theories.
- Comparative analysis of technology stock trends across OECD nations.
- Econometric testing of a neoclassical growth model with endogenous innovation.
- Evaluation of European innovation policies and strategic challenges.
Excerpt from the Book
3.2 Interpretation
The charts presented in Figure 1 indicate some interesting results. First, as all figures have the same scale on both, the left and the right Y-axis, the level of labour productivity, expressed in GDP over annual hours worked and the level of technology stock, expressed in R&D stock over annual hours worked is shown. In 1973, the United States were the clear leader in labour productivity as well as in technology stock employed per hour worked. In 1998, the last period displayed in the charts, Sweden shows the highest technology stock per hour worked leaving the United States and Germany behind. A further comparison of the technological expenditures per hour in 1998 shows large country differences and reveals low levels of technology stocks in some countries. Spain, Australia, Italy, and Ireland are the countries with the lowest technology stock, a fact that – in the case of Spain and Ireland – might be due to their catch-up process in the European Community with foreign direct investments focussing on production rather than on R&D activities in these countries. Another explanation for the low technology stocks of Spain and Ireland is that these two countries significantly benefited from technology spillovers of other European countries, making it unnecessary for them to invest heavily in technology on their own. Spain, for example, was able to increase its labour productivity relatively fast compared to its poor technology stock growth, a finding that could be reconciled by accounting for technological spillover effects.
Summary of Chapters
1 Introduction: Introduces the research question regarding why economic growth rates differ among homogeneous OECD countries and outlines the thesis structure.
2 Principal Earlier Studies: Reviews foundational literature and empirical studies on the relationship between R&D expenditure and economic productivity.
3 Comparison of Technology Stocks among 15 OECD Countries: Analyzes the development of R&D stocks relative to GDP for 15 countries and provides a geographical visualization of European innovation.
4 Econometric Analysis: Develops and tests a neoclassical growth model to quantify the impact of innovation on output while correcting for autocorrelation.
5 Innovation Policies in Europe: Discusses the weaknesses of European innovation systems and describes the action plans aimed at fostering an innovative, knowledge-based economy.
6 Conclusions: Summarizes key findings on the significant role of technology in growth and suggests directions for future research regarding policy effectiveness.
Keywords
Innovation, Economic Growth, OECD, R&D Expenditures, Labour Productivity, Technology Stock, Neoclassical Growth Model, European Community, Technological Spillovers, Policy Analysis, Capital Accumulation, Endogenous Growth, Econometric Analysis, Patent Data, Knowledge-based Economy.
Frequently Asked Questions
What is the fundamental objective of this thesis?
The thesis aims to analyze the impact of innovation on economic growth in 15 OECD countries and to evaluate the specific innovation policies implemented within the European Community.
What are the core research themes covered?
The central themes include the measurement of technology stocks through R&D expenditures, the econometric estimation of innovation's contribution to GDP growth, and the structural analysis of European innovation policies.
What research question does the thesis address?
It seeks to understand how differences in national growth rates can be reconciled by accounting for innovation, and to what extent increased R&D investment stimulates economic output.
Which methodology is employed for the empirical analysis?
The author uses a neoclassical production function, modifying it to endogenize technology, and applies an iterative Cochrane-Orcutt procedure to correct for autocorrelation in the OLS regression models.
What is the focus of the main body of the work?
The main body examines historical R&D trends, performs an econometric regression on labor productivity, and provides a qualitative review of European innovation strategies and frameworks.
How are the key findings characterized?
The work is characterized by keywords such as innovation, endogenous growth, R&D stocks, economic policy, and econometric modeling.
How does the author define innovation for the purpose of this study?
The author adopts the definition from the OECD Oslo Manual, focusing on new or significantly improved products, services, or processes based on technological developments.
Why are Spain and Ireland highlighted regarding their technology stocks?
They are noted for having relatively low R&D investment, which the author suggests may be attributed to their catch-up phases in the European Community and benefits derived from technology spillovers rather than domestic innovation alone.
What is the significance of the "European Technology Stock Map" presented in Section 3?
It visually illustrates the heterogeneity of the European innovation landscape, clearly distinguishing high-performing nations from those with lower R&D intensity.
- Quote paper
- Philipp Jan Siegert (Author), 2004, Innovation and Economic Growth, Munich, GRIN Verlag, https://www.grin.com/document/28580
