Determinants of innovative capability of a country and its role in economic growth

Over the years a number of studies have come to the conclusion that economic prosperity of countries depends on the productivity with which national resources are employed. Since individual firms create jobs and growth in a country, it is essential to study the functioning of these firms. If the firms in a country are productive and growing, the country in aggregate will have a higher growth rate. So, the key to a country's prosperity is the productivity of its firms. Other studies have shown a link between innovative capability of a country and productivity of its firms. Thus, any discussion of growth of economies must focus on determinants of innovation capabilty of nations. The paper to be presented at the Madrid Conference will have two objectives: (1) To discuss the role innovation plays in global competition and how firms from some of the emerging markets are using innovation to compete in global markets, (2) To discuss the role of innovative capability in growth of a country and then use an empirical model to identify the determinants of innovative capability of a country. The World Economic Fourm has been measuring national competiveness for a number of years. The dependent variable in the model to be presented at the Conference will be an index of innovative capability computed by the World Economic Forum. The authors will use regression analysis to identify variables that affect the index of innovative capability. The results of the empirical model should be useful to policy makers in countries promoting economic growth by improving the productivity of the firms in their countries.