Developing countries like other developed countries, aim to use their innovations as one of the engines of economic growth, in addition to making them a tool that contributes to overcoming economic problems by increasing export growth rates of high-return technological products. And Developing countries differ among themselves in terms of their ability to localize modern technology within commodities, products, and various production processes within the economic sectors. With, the emergence of some recent trends in the economic literature on economic growth, which are based on explaining technological progress as an evolutionary phenomenon, made all countries aim not only to own technology and use it, but rather to strive to achieve leadership in innovation by encouraging investment in technological innovations and research and development activities in all fields. In fact, the governments of developing countries have tried, through economic plans, programs, and policies, with different entrances to their influence, to achieve higher levels of economic growth, and to work to increase this growth in most economic, social, and cultural fields. With the levels of development achieved in practice, it still calls for raising its level to include most of the indicators that indicate it on the one hand and to ensure the sustainability of this development on the other hand. In recent years, both researchers and policymakers have increasingly paid attention to investigating the link between innovation, entrepreneurship, and regional outcomes. However, in this study, we study specifically the relationship between technological innovation and economic growth in selected developing countries (A sample of three middle-income developing regions (South America, Central America, and South Africa)). The motivation behind identifying this middle-income sample from developing countries was that in a modern economy, value creation, economic growth, and employment are closely linked to innovation. The innovation process begins at the regional, national, and international levels. In this case, innovation can be a way out of the middle-income trap in developing countries.
Hence, the main objective of this study is to examine the bidirectional linkage between innovation and economic growth. In sum, we would like to assess the importance of innovation-economic growth linkage, by investigating whether the level of innovation has contributed to economic growth, or whether the extension of the innovation is simply a consequence of rapid economic growth. Hence, the problem to be discussed can be formulated, namely: What is the relationship between technological innovation in developing middle-income countries on economic growth?
Hence, the research examines the long-term and short-term relationship between technological innovation and per capita economic growth in 25 middle-income developing countries during the period 1990-2021. This study uses seven different indicators of technological innovation: Human capital, physical capital, Research and development expenditure, scientific and technical journal articles, Patents filed by residents & by non-residents, Total factor productivity, and foreign direct investment. To examine this long-term relationship with an individual's economic growth. Using the Yamamoto and Toda causality test technique, the study finds evidence of a long-run relationship between innovation and per capita economic growth in most of the cases, typically with reference to the use of a particular innovation indicator. Using the Granger causality test, the study finds the presence of both unidirectional and bidirectional causality between innovation and per capita economic growth. These results vary from country to country, depending upon the types of innovation indicators that we use in the empirical investigation process. Most importantly, the study finds that all these innovation indicators are considerably linked with per capita economic growth. The difference in these results from one country to another is due to the problem of heterogeneity in the level of economic development between regions of developing countries. There are countries that have more natural wealth. For example, (1) the South American region was a major source of cheap raw materials, in addition to semi-finished materials, and imported expensive goods. But since the 70s. Due to external circumstances and domestic policy decisions, it insisted on expanding the industrial sector and reducing imports. (2) While Central America depends on its economy on agricultural exports. In addition, the Central American region is particularly attractive to companies (especially clothing companies) due to its geographic proximity to the United States, extremely low wages, and great tax advantages. (3) While the region of Southern Africa is a region rich in precious metals such as gold, diamonds, and uranium, many mines have been discovered to extract these minerals. The region is considered one of the largest regions exposed to demographic growth, and despite that, there are nearly forty million poor people, which has led to a lack of education and a large number of illiterates in some of its countries. Poverty and corruption are among the biggest factors that impede economic growth.
In short, the main innovations and contributions of this study are as follows: (1) Through standard analysis, this study reveals the mechanism of impact of technological innovation on economic growth, and thus enriches research on the ability to enhance these indicators so that developing countries can catch up with economic development (2) Many researches/studies have been conducted in the field of technological innovation and economic growth, but there is little research on the relationship between technological innovation and economic growth in middle-income developing countries. This enriches the literature on enhancing the importance of focusing on studying that relationship in these countries. At present, the state plays a role in focusing on stimulating technological innovation (technological improvements), and this can be achieved by accelerating the development of infrastructure, stimulating capital/technology investment, and improving the quality of human resources. (3) The results also show some sensitivity to choosing the research and development spending variable. There is also evidence of variation between the three regions in the sample. Moreover, R&D spending plays a role in influencing economic growth in South America and the Southern African region. However, the results are different for Central Americans. We find that the countries of the study sample spend less than 2.5% of the gross domestic product, and this percentage is the global average for spending on R & D as it is known in developed countries. Thus, it is necessary to increase the awareness of developing countries in our study sample of increasing spending on research and development by increasing research and development centers. Hence, increasing investment in R&D in South America, Central America, and Southern Africa should be a major objective of policymakers and decision-makers in order to boost economic growth and thus drive the welfare of the population. This enriches the literature on the real causes of lagging in developing countries, which are poor spending on research and development.
Keywords: Technological Innovation; Economic Growth; Developing Countries; Regional Heterogeneity
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