R&D, Innovation, and Economic Growth : An Empirical Analysis

This paper investigates the main postulations of the Ramp;D based growth models that innovation is created in the Ramp;D sectors and it enables sustainable economic growth, provided that there are constant returns to innovation in terms of Ramp;D. The analysis employs various panel data techniques and uses patent and Ramp;D data for 20 OECD and 10 Non-OECD countries for the period 1981-97. The results suggest a positive relationship between per capita GDP and innovation in both OECD and non-OECD countries, while the effect of Ramp;D stock on innovation is significant only in the OECD countries with large markets. Although these results provide support for endogenous growth models, there is no evidence for constant returns to innovation in terms of Ramp;D, implying that innovation does not lead to permanent increases in economic growth. However, these results do not necessarily suggest a rejection of Ramp;D based growth models, given that neither patent nor Ramp;D data capture the full range of innovation and Ramp;D activities