Innovation and economic growth in developing countries: A cross country study
Lawrence J. Gomes
Is innovation important for economic growth and development in less developed countries? Is it one of the drivers of economic growth that should be more directly incorporated in analyzing the causes of economic growth in less developed countries? The answer to these questions depends on what is meant by the term innovation in the context of less developed counties. In order for innovation to be a driving force in economic growth, the very nature of innovation needs to be recalibrated. “Most people in the West equate it with technological breakthroughs, embodied in revolutionary new product that are taken up by the elites and eventually trickle down to the masses”. (The Economist, April 15, 2010) Such innovation is considered to be the privilege of highly educated labor employed in highly R & D intensive companies with strong ties to the leading multinationals. In this sense, innovation is the monopoly of the “first world”. There is, however, another way to look at innovation that goes beyond the high-techs. In this broader perspective, many innovations consist of incremental improvements to products and processes aimed at the middle and lower in come households (The Economist, April 15, 2010). These include logistics, distribution, and marketing which drive economic growth of the less developed countries.
In this paper I examine the role of innovation in determining economic growth of less developed countries. The role of institutions, human capital and research, infrastructure, market sophistication, and business sophistication in innovation and economic growth will also be considered.