The impact of R&D expenditures and patents on economic growth

Abstract

The literature has observed a rise in the number of studies examining the impact of research and development (R&D) activities as a means of inputting technological innovations, and patents as a means of outputting technological innovations, on the growth process of countries. This increase in research can be attributed to the recognition of technological innovations as a key driver of sustainable growth, as posited by endogenous growth theories. This research examines the causality relationship between economic growth and R&D expenditures, as well as patent applications, through a panel data analysis, for 18 countries from 1996 - 2020. The objective is to provide empirical support to the existing literature of the study of the impact of innovation on economic growth by incorporating R&D expenses and patents as indicators. Lastly, the objective is to derive to meaningful insights that will help stakeholders and policymakers promote innovation to achieve economic growth. The study utilizes the fixed effect model as a fundamental framework to estimate the causal association between economic growth and R&D expenditures as well as patent applications. The data used in this analysis are derived from a panel of 18 countries. The results of the analysis in this study, showed that R&D expenditures are statistically significant and affect the GDP growth of the economies of the selected countries, while patents are only statistically significant at the level of 10%. This research is anticipated to provide a valuable addition to the existing literature due to its unique estimation method, the time frame analyzed, and the range of countries investigated.