National innovative capacity and knowledge creation in advanced economies: an empirical investigation

Abstract

The main objective of this study is to seek the robust and significant determinants of National Innovative Capacity in technologically advanced economies. In this era of knowledge-based economies having rapidly changing technology, innovation and digitization, it is very important to examine what determines innovation. For this purpose, the role of Information and Communication Technology, Exposure to external technology, R&D expenditure, Human capital, Governance and financial deepening in shaping the national innovative capacity is examined empirically. The aim is to reflect the factors that influence innovation and knowledge creation activities at national level. The study uses a panel of 13 technologically advanced countries with the aim to learn from the best practices. The fixed effect with robust standard errors estimation technique is used for estimation of the model over the period 1996–2015. Moreover, the innovative output index (IQ) is estimated to judge and analyze the national innovative capacity of selected countries. The results suggest that the core variables of estimated model remained significant with expected sings and yielded positive impact on dependent variable. Based on the results, it is suggested that the developing economies should make substantial investments in above mentioned factors in order to go along the path similar to OECD advanced economies.