Impact of innovation on economic growth: a comparative analysis of the economic community of West African states and India

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Peter the Great St. Petersburg Polytechnic University (SPbPU)

IMPACT OF INNOVATION ON ECONOMIC GROWTH: A COMPARATIVE ANALYSIS OF THE ECONOMIC COMMUNITY OF WEST AFRICAN STATES AND INDIA

Samrat Ray, Dossou Yedehou Leandre

PhD student

Аннотация

Санкт-Петербургский политехнический университет Петра Великого

ВЛИЯНИЕ ИННОВАЦИЙ НА ЭКОНОМИЧЕСКИЙ РОСТ: СРАВНИТЕЛЬНЫЙ АНАЛИЗ ЭКОНОМИЧЕСКОГО СООБЩЕСТВА ЗАПАДНЫХ АФРИКАНСКИХ ГОСУДАРСТВ И ИНДИИ

Самрат Рэй, Доссу Иедоху Леандр

В данной статье рассматривается влияние инноваций на функционирование Экономики ЭКОВАС (Экономическое Сообщество Западноафриканских Государств) и Индии. Результаты предыдущей работы показывают, что инновации оказывают негативное влияние на экономический рост, в странах Западноафриканского Экономического и Валютного Союза (ЗАЭВС) с 2009 до 2018 года и Индии с 1996 до 2011 года. Сравнительное исследование с той же моделью и новым показателем инноваций в странах ЭКОВАС и Индии дает результат, который отражает положительное влияние инноваций на экономический рост. Наконец, были сделаны соответствующие рекомендации для стран ЭКОВАС и Индии взять на себя ответственность за содержание Глобального Инновационного Индекса (ГИИ), который послужил моделью для анализа, для обеспечения большей экономической и устойчивой эффективности.

Ключевые слова: Инновация, экономический рост, ЭКОВАС и Индии.

Abstract

This article examines the impact of innovation on the economic performance of countries in the West African Economic Communities (ECOWAS) and India. The results of previous work show that innovation has a negative impact on economic growth in the countries of the West African Economic and Monetary Union (WAEMU) from 2009 to 2018 and India from 1996 to 2011. The comparative study with the same model and new indicator of innovation of the ECOWAS countries and India gives a result which reflects the positive effect of innovation on economic growth. Finally, relevant recommendations were made for the ECOWAS countries and India to take ownership of the content of the Global Innovation Index (GII), which served as a model for analysis, for more economic and sustainable performance.

Keywords: Innovation, Economic Growth, ECOWAS and India.

Introduction

While it is clearly recognized that innovation is one of the key determinants of territorial economic development, measurement remains an important issue. In this sense, much academic work (both theoretical and empirical) has developed over the past two decades and is attempting to explain innovation through two main indicators: inputs (R&D expenditure, R&D workforce) (Mohnen and Rцller, 2005) [1] and innovation outputs (patent filings, Scientific & Technical publications, etc.). While this work have significant contributions to the understanding of innovation dynamics and in particular geographic dynamics based on knowledge externalities (Autant-Bernard, 2010) [2] but, they nevertheless have certain limits. Many Russian researchers have studied the concept of innovation and economic growth, such as (Ulchenkova, 2007; Bashirova и Iskhakova, 2019) [3], [4]. Their conclusion reveals that scientific technological progress plays a fairly serious role in the Russian economy, but the net contribution of innovative factors (including institutional innovation) is too insignificant. Innovative factors have not reached such a level of utilization that allows us to move to accelerate economic growth. The basic hypothesis in this research is that innovation contributes to a positive effect on economic performance. By verifying this hypothesis, the previous work of some authors reveals a relationship of negative contribution to the performances of the WAEMU countries and also of India [5], [8]. Starting from the same model and process, let us check with a comparative study, what would be obtained for the countries of the ECOWAS zone and India.

Purpose and methodology

Research. Purpose of this article is to make relevant recommendations based on an empirical analysis model to verify the effects of innovation on economic performance. The methodological approach envisaged in the framework of this work is based on documentary sources, academic literary journals addressing innovation, the Global Innovation Index (GII), which is used in place of the traditional R&D indicator, known and already present in the multitudes researches. Finally, Global Innovation Index is highlighted by a simple linear regression analysis model, to account for its influence on economic performance, following the deductive and inductive method.

Literature review

There is an abundant literature on the determinants of innovation (Mairesse and Mohnen, 2010) [9] for an exhaustive review, within which two types of work can be distinguished: firstly, those that understand the dynamics of innovation across the industrial sector and secondly, those who recognize the role of the service sector in innovation processes. Investment in R&D activities, usually measured by R&D spending, is one of the main determinants of innovation in industrial enterprises (Baldwin and Hanel, 2003) [10]. Numerous studies attest to the positive link between R&D spending and innovation, including: (Griffith, and Peters (2006); Mairesse and Mohnen, 2005) [11], [12]. The work on the determinants of innovation to economic growth in the context of developing countries is the work of the authors (Bouoiyour J., Hanchane H. and others, 2009) [13] who have shown that the determinants of innovation (attraction of foreign direct investment, R&D expenditure and human capital) positively affect economic growth in a sample of sixty-three developing countries over a period from 1960 to 2004. Specifically for India, the authors can be cited (Chandrashekar and Basvarajappa, 2001, Kumar and Subrahmanya, 2010) [14], [15] who made suggestions in order to make the governments understand their commitment, to encourage and support innovation and technological activities that would promote accelerated productivity of the Indian economy. Then, (Mishra, 2008) [2 ibidem] who has studied the relationship between innovation in the financial sector and the growth of gross domestic product and its results show that financial innovations are new financial instruments, which, with the market, make it possible to mobilize the financial surplus of savers, and the move towards more productive investment sectors for a higher level of capital, and therefore an increase in economic productivity. Finally, the research of (Shukla, 2017) [16] focuses on the growth of India's gross domestic product and the factors of innovation. These results reveal that innovation is a key factor in a country's productivity, and the financial allocation in basic research and education helps to increase and maintain long-term productivity. To achieve this, India must invest more in research and development, new and industrial techniques, education which in the near future will have exponential results of wealth production. But the result of its model results in a negative effect of innovation factors on India's gross domestic product growth.

Statistical basis of analysis

Statistical analysis of the sample for this article is based on growth of Gross Domestic Product (GDP) and the Global Innovation Index of the ECOWAS countries and India for the period 2011 to 2018. Statistical data come from the statistical database of the World Bank, International Monetary Fund and World Intellectual Property Organization. The regression model based on this data, gives the results recorded in the following tables.

Results obtained

Table 1

Results of the linear regression analysis of India the period 2011 to 2018

Sources: Extract from Regression Analysis Microsoft Excel 2007 (Author's calculations, 2020)

Interpretation on the obtained tables: The results of the regression analysis of a linear model without a constant have very high coefficients of determination (96,52%), this suggests that this model is statistically significant with a probability of 95 %. The significance of F for our regression model without constant is 4,98E-05, which is lower than the critical threshold set at 0.05, so our model is reliable. Coefficient innovation factor (0,16865) is positive. Therefore, l'innovation has a positive effect on Indian economic growth. For one 1-score increase in the Global Innovation Index, India's economic growth rate varies by 0, 06% (0,1366 to 0,2006). The present result obtained from the regression model for India, is contrary to the results of the negative effects of innovation on the Indian economic growth of (Shukla, 2017). The basic hypothesis of this article is then verified for the Indian economy.

Table 2

Results of the linear regression analysis of ECOWAS the period 2011 to 2018

Sources: Extract from Regression Analysis Microsoft Excel 2007 (Author's calculations, 2020).

economic innovation india african

Interpretation on the obtained tables

The results of the regression analysis of a linear model without a constant have very high coefficients of determination (93,6%), this suggests that this model is statistically significant with a probability of 95 %. The significance of F for our regression model without constant is (0,000233), which is lower than the critical threshold set at 0.05, so our model is reliable. Coefficient innovation factor (0,196633) is positive. Therefore, l'innovation has a positive effect on ECOWAS economic growth. For one (1) score increase in the Global Innovation Index, ECOWAS economic growth rate varies by 0, 10 % (0,1453 to 0,2479). The result obtained from the regression model for ECOWAS data contradicts the results of the negative effects of innovation on economic growth for the WAEMU countries, which all is member of ECOWAS economic integration zone (see Dossou & Khavatova, 2020). The basic hypothesis of this article is then verified for the ECOWAS economy.

Discussion

The discussion in the context of this article, refers to giving a relevant scientific significance to the indicator Global innovation Index, for the fact that it can validate the evidence of the starting hypothesis. The content of Global innovation Index then validly represents the innovative factors stimulating economic growth at the expense of indicators such as: R&D expenditures, Education expenditures, Foreign Direct Investment, Patent applications, etc. took separately. Results of the impact of innovation on the economic growth of India and ECOWAS are positive but with a low growth rate. This means that, Global innovation Index is based on the sum of many sub-indices, subdivided into several sections. Some sub-indices may be low for India and ECOWAS countries. Finally, our recommendations to India and the ECOWAS country are to take ownership of representative sub-index indicators, mentioned in the content of the various sections constituting the Global Innovation Index.

Conclusion

Innovation is an essential element of economic growth validated by numerous scientific works. But allocating funds exclusively to research and development alone is not a good strategy for improving sustainable economic growth. Through this model, Global Innovation Index can be seen as a new indicator of a global benchmark in measuring the performance of an economy in terms of innovation. The Global Innovation Index then becomes a precious tool in the same way as the old indicator (R&D expenditure) to serve as a comparison in order to facilitate public-private dialogue and thanks to which decision-makers, business leaders and other stakeholders can assess progress in innovation and economic growth every year. The results of our work show the positive effect of innovation on economic growth, and then the growth of India and the ECOWAS countries is driven by innovation, that is not the case for previous work of some authors. Consequently, a question arises for decision makers in these different regions: How should we allocate our resources effectively to economic sectors, for more growth? This question opens the way to future economic research.

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