Skip to main content
SpringerLink
Log in

Institutional Effects on Innovation and the Requirements for Structural Reforms

  • Published:
Journal of the Knowledge Economy Aims and scope Submit manuscript

Abstract

The effect of institutions on innovation outcomes, and therefore on economic growth, is a well-defined relationship in the literature. However, through the empirical analysis of the present paper, this relationship seems to differ between different groups of countries. The above issues are examined using annual data for 152 countries for the period from 2007 to 2017. The empirical investigation of the above relations highlights the fact that there is a positive and statistically significant effect of institutions on innovative performance for the total period under analysis. The countries under investigation are divided into three groups based on their difference in the institutional background score in relation to the average of 20 benchmark economies. The analysis shows that there is an “S-shaped” relationship between innovation and institutions. The higher the distance of a group from the reference economies—in terms of their institutional performance—the higher the impact of the institutional background on innovation since there is more capacity and greater potential for improvement of the institutional background. The analysis highlights the need for structural reforms to accelerate institutional changes at an unprecedented pace in order to transform institutions that hinder innovation into institutions that promote innovation within a reasonable time frame. Finally, the analysis results in the creation of heat maps (one for each country group) which presents—for each economy—which institutions are deemed necessary to be structurally reformed, culminating in policy proposals.

This is a preview of subscription content, log in via an institution to check access.

Access this article

Log in via an institution

Price excludes VAT (USA)
Tax calculation will be finalised during checkout.

Instant access to the full article PDF.

Institutional subscriptions

Fig. 1
Fig. 2
Fig. 3

Similar content being viewed by others

Data Availability

The data used were gathered from free available sources.

Notes

  1. Albania, Algeria, Angola, Argentina, Armenia, Australia, Austria, Azerbaijan, Bahrain, Bangladesh, Barbados, Belgium, Belize, Benin, Bhutan, Bolivia, Bosnia and Herzegovina, Botswana, Brazil, Brunei, Burkina Faso, Burundi, Bulgaria, Cambodia, Cameroon, Canada, Cape Verde, Chad, Chile, China, Colombia, Congo, Costa Rica, Cote d’Ivoire, Croatia, Cyprus, Czech Republic, Denmark, Dominican Republic, Ecuador, Egypt, El Salvador, Estonia, Ethiopia, France, Gabon, Gambia, Germany, Georgia, Greece, Guatemala, Guinea, Guyana, Haiti, Honduras, Hong Kong, Hungary, Iceland, Indonesia, Finland, India, Israel, Italy, Iran, Ireland, Jamaica, Japan, Jordan, Kazakhstan, Kenya, Korea, Kuwait, Kyrgyz Republic, Laos, Latvia, Lesotho, Lebanon, Liberia, Libya, Lithuania, Luxembourg, Madagascar, Malaysia, Malawi, Mali, Malta, Mauritania, Mauritius, Mexico, Moldova, Mongolia, Montenegro, Morocco, Mozambique, Myanmar, Namibia, Nepal, Netherlands, New Zealand, Nicaragua, Nigeria, North Macedonia, Norway, Oman, Pakistan, Panama, Paraguay, Peru, Philippines, Poland, Portugal, Puerto Rico, Qatar, Romania, Russia, Rwanda, Saudi Arabia, Senegal, Serbia, Seychelles, Sierra L καλύτερα να τα δουνeone, Singapore, Slovakia, Slovenia, South Africa, Spain, Sri Lanka, Suriname, Swaziland, Sweden, Switzerland, Syria, Taiwan, Tanzania, Thailand, Timor, Trinidad and Tobago, Tunisia, Turkey, Uganda, Ukraine, United Arab Emirates, UK, USA, Uruguay, Venezuela, Vietnam, Yemen, Zambia, Zimbabwe.

  2. Australia, Austria, Belgium, Denmark, Finland, Germany, Hong Kong, Ireland, Israel, Japan, Luxembourg, Malaysia, Netherlands, New Zealand, Norway, Singapore, Sweden, Switzerland, UK, USA.

  3. Of course, it should be noted that the period under analysis includes the period of the crisis that affected almost all economies. As a result, these time horizons may actually be shorter.

References

  • Acemoglu, D., & Robinson, J. A. (2000). Political losers as a barrier to economic development. The American Economic Review, 90(2), 126–130.

    Article  Google Scholar 

  • Acemoglu, D., & Robinson, J. A. (2012). Why nations fail: the origins of power, prosperity and poverty. New York: Crown Publishing.

    Google Scholar 

  • Acemoglu, D., Johnson, S., & Robinson, J. A. (2001). The colonial οrigins of comparative development: an empirical investigation. American Economic Review, 91(5), 1369–1401.

    Article  Google Scholar 

  • Aghion, P., & Akcigit, U. (2017). Innovation and growth: the Schumpeterian perspective. In L. Matyas, R. Blundell, E. Cantillon, B. Chizzolini, M. Ivaldi, W. Leininger, et al. (Eds.), Economics without borders: economic research for European policy challenges (pp. 29–72). Cambridge: Cambridge University Press.

    Chapter  Google Scholar 

  • Aghion, P., & Howitt, P. (1998). Endogenous growth theory. Cambridge: MIT Press.

    Google Scholar 

  • Aghion, P., & Howitt, P. (2009). The economics of growth. Cambridge: MIT Press.

    Google Scholar 

  • Aghion, P., & Jaravel, X. (2015). Knowledge spillovers, innovation and growth. The Economic Journal, 125(583), 533–573.

    Article  Google Scholar 

  • Aghion, P., Fehr, E., Holden, R., & Wilkening, T. (2015). The role of bounded rationality and imperfect information in subgame perfect implementation: an empirical investigation. CESifo Working Paper Series 5300, CESifo.

  • Amour, L. S. (2012). The Internet: an unprecedented and unparalleled platform for innovation and change. The Global Innovation Index 2012.

  • Andrés, A. R., Asongu, S. A., & Amavilah, V. (2015). The impact of formal institutions on knowledge economy. Journal of the Knowledge Economy, 6, 1034–1062.

    Article  Google Scholar 

  • Ang, J. S., & Cheng, Y. (2005). Financial innovations and market efficiency: the case for single stock futures. Journal of Applied Finance, 15(1).

  • Barro, R. (1997). Determinants of economic growth: a cross-country empirical study. Cambridge and LondonQ MIT Press.

  • Carayannis, E. G., & Rakhmatullin, R. (2014). The quadruple/quintuple innovation helixes and smart specialisation strategies for sustainable and inclusive growth in Europe and beyond. Journal of the Knowledge Economy, 5(2), 212–239.

    Article  Google Scholar 

  • Carayannis, E. G., Acikdilli, G., Ziemnowicz, C. (2019) Creative destruction in international trade: insights from the quadruple and quintuple innovation helix models. Journal of the Knowledge Economy, https://doi.org/10.1007/s13132-019-00599-z.

  • Casadella, V., & Uzunidis, D. (2017). On the relevance of innovation capacities in the institutionalist approach applied to developing countries: bases of analysis. Journal of the Knowledge Economy. https://doi.org/10.1007/s13132-017-0462-4.

  • Chu, A. C., Cozzi, G., Furukawa, Y., & Liao, C. H. (2018). Inflation and innovation in a Schumpeterian economy with north–south technology transfer. Journal of Money, Credit and Banking, 51(2–3).

  • Cirera, X., Pacchioni, E. A. G., Maloney, W. (2017). Why poor countries invest too little in R&D, 29 November, VoxEu.org.

  • Collis, B. (1996). The internet as an educational innovation: lessons from experience with computer implementation. Educational Technology, 369(6), 21–30.

    Google Scholar 

  • Diebolt, C., & Hippe, R. (2019). The long-run impact of human capital on innovation and economic development in the regions of Europe. Applied Economics, 51(5), 542–563.

    Article  Google Scholar 

  • Dima, A. M., Begu, L., Vasilescu, M. D., & Maassen, M. A. (2018). The relationship between the knowledge economy and global competitiveness in the European Union. Sustainability, 10(6), 1706.

    Article  Google Scholar 

  • Donges, A., Meier, J.-M. A., Silva, Rui, C. (2016). The impact of institutions on innovation, Beiträge zur Jahrestagung des Vereins für Socialpolitik 2016: Demographischer Wandel - Session: Institutions, No. G13–V2.

  • Ederer, F., & Manso, G. (2013). Is pay-for-performance detrimental to innovation? Management Science, 59(7), 1496–1513.

    Article  Google Scholar 

  • European Commission. (2005). Oslo manual, the measurement of scientific and technological activities. OECD Publishing, 2005, France.

  • Faems, D., & Subramanian, A. M. (2013). R&D manpower and technological performance: the impact of demographic and task-related diversity. Research Policy, 42(9), 1624–1633.

    Article  Google Scholar 

  • Fonseca, T., de Faria, P., & Lima, F. (2019). Human capital and innovation: the importance of the optimal organizational task structure. Research Policy, 48(3), 616–627.

    Article  Google Scholar 

  • Goñi, E., & Maloney, W. F. (2017). Why don’t poor countries do R&D? Varying rates of factor returns across the development process. European Economic Review, 94, 126–147.

    Article  Google Scholar 

  • Gu, F. (2005). Innovation, future earnings, and market efficiency. Journal οf Accounting, Auditing & Finance, 20(4), 385–418.

    Article  Google Scholar 

  • Hall, R., & Jones, C. (1999). Why do some countries produce so much more output per worker than others? Quarterly Journal of Economics, 114(1), 83–116.

    Article  Google Scholar 

  • He, Q. (2018). Inflation and innovation with a cash-in-advance constraint on human capital accumulation. Economics Letters, 171, 14–18.

    Article  Google Scholar 

  • Lucas, R. (1988). On the mechanics of economic development. Journal of Monetary Economics, 22(1), 3–42.

    Article  Google Scholar 

  • Nelson, R. R., & Winter, S. G. (1982). An evolutionary theory of economic change. Cambridge, MA: Harvard Univ. Press.

    Google Scholar 

  • Nelson, R. R., & Winter, S. G. (2002). Evolutionary theorizing in economics. The Journal of Economic Perspectives, 16, 23–46.

    Article  Google Scholar 

  • North, D. C. (1990). Institutions, institutional change and economic performance. New York: Cambridge University Press.

    Book  Google Scholar 

  • Nour, S. S. O. M. (2014). Regional systems of innovation and economic structure in the Arab region. Journal of Knowledge Economy, 5, 481–520.

    Article  Google Scholar 

  • Olsson, O. (2000). Knowledge as a set in idea space: an epistemological view on growth. Journal of Economic Growth, 5(3), 253–275.

    Article  Google Scholar 

  • Omidi, V., Shahabadi, A., & Mehregan, N. (2018). Innovation drivers in developing countries. Journal of the Knowledge Economy, 11, 707–720. https://doi.org/10.1007/s13132-018-0568-3.

    Article  Google Scholar 

  • Pece, Α. Μ., Simona, Ο. Ε. Ο., & Salisteanu, F. (2015). Innovation and economic growth: an empirical analysis for CEE countries. Procedia Economics and Finance, 26, 461–467.

    Article  Google Scholar 

  • Petrakis, P. E., Kostis, P. C., Valsamis, D. G. (2014). “Innovation and competitiveness: culture as a long-term strategic instrument. Culture on Innovation and Competitiveness during the European Great Recession”, 3rd Global Innovation and Knowledge Academy (GIKA) Conference, Spirit of Strategy (SOS): the New S.O.S. for Competitive Business, 7–9 July 2014, Valencia, Spain.

  • Petrakis, P. E., Valsamis, D. G., & Kafka, K. I. (2017). From an optimal to a stagnated growth prototype: the role of institutions and culture. Journal of Innovation & Knowledge, 2(3), 97–105.

    Article  Google Scholar 

  • Rodriguez-Bolivar, M.P. (2014). Measuring e-government efficiency. The Opinions of Public Administrators and Other Stakeholders, Springer.

  • Rodrik, D. (2000). Institutions for high-quality growth: what they are and how to acquire them. Studies in Comparative International Development, 35(3), 3–31.

    Article  Google Scholar 

  • Rodrik, D. (2003). Institutions, integration, and geography: in search of the deep determinants of economic growth. Princeton, NJ: Princeton University Press.

    Google Scholar 

  • Sala-i-Martin, X. (2002). The disturbing rise of global income inequality. NBER Working Paper #8904.

  • Savrul, M., & Incekara, A. (2015). The effect of R&D intensity on innovation performance: a country level evaluation. Procedia - Social and Behavioral Sciences, 210, 388–396.

    Article  Google Scholar 

  • Solow, R. M. (1957). Technical change and the aggregate production function. Review of Economics and Statistics, 39(3), 312–320.

    Article  Google Scholar 

  • Tebaldi, E., & Elmslie, B. (2008). Institutions, innovation and economic growth. Journal of Economic Development, 33(2), 1–27.

    Article  Google Scholar 

  • Tebaldi, E., & Elmslie, B. (2013). Does institutional quality impact innovation? Evidence from cross-country patent grant data. Applied Economics Volume, 45(7), 887–900.

    Article  Google Scholar 

  • Witt, U. (2008). What is specific about evolutionary economics? Journal of Evolutionary Economics, 18, 547–575.

    Article  Google Scholar 

  • Xu, C., & Huang, H. (1999). Institutions, innovations, and growth. American Economic Review, 89(2), 438–443.

    Article  Google Scholar 

  • Yves, B., Leblanc, S. (2002). Innovation in Atlantic Canada, The Canadian Institute For Research On Regional Development, Maritime Series, Canada, 2002, p. 32.

Download references

Author information

Authors and Affiliations

  1. Department of Economics, National and Kapodistrian University of Athens, Stadiou 5 Street, Athens, Greece

    Kyriaki I. Kafka, Pantelis C. Kostis & Panagiotis E. Petrakis

  2. Department of Business Administration, Hellenic Open University, Patras, Greece

    Pantelis C. Kostis

Authors
  1. Kyriaki I. Kafka
    View author publications

    You can also search for this author in PubMed Google Scholar

  2. Pantelis C. Kostis
    View author publications

    You can also search for this author in PubMed Google Scholar

  3. Panagiotis E. Petrakis
    View author publications

    You can also search for this author in PubMed Google Scholar

Corresponding author

Correspondence to Panagiotis E. Petrakis.

Ethics declarations

Conflict of Interest

The authors declare that they have no conflict of interest.

Additional information

Publisher’s Note

Springer Nature remains neutral with regard to jurisdictional claims in published maps and institutional affiliations.

Rights and permissions

Reprints and permissions

About this article

Check for updates. Verify currency and authenticity via CrossMark

Cite this article

Kafka, K.I., Kostis, P.C. & Petrakis, P.E. Institutional Effects on Innovation and the Requirements for Structural Reforms. J Knowl Econ 13, 211–235 (2022). https://doi.org/10.1007/s13132-020-00705-6

Download citation

  • Received:

  • Accepted:

  • Published:

  • Issue Date:

  • DOI: https://doi.org/10.1007/s13132-020-00705-6

Keywords

Search

Navigation