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Title: National Innovative Capacity, Technological Advancement and Total Factor Productivity Growth
Authors: Afzal, Muhammad
Keywords: Arts & Humanities
Issue Date: 2020
Publisher: University of the Punjab , Lahore
Abstract: Total factor productivity (TFP) is a basic driver behind the economic performance and a key to increase welfare of people. In this era of knowledge based economy, it is worthwhile to revisit the determinants of TFP. Despite the recognized importance of national innovative capacity, technological advancement and TFP in explaining the sustainable economic growth, in the past very little attention has been given in the growth literature to empirically analyze these driving forces of economic performance. As innovation has a vital role in promoting TFP, therefore, the present research investigated the determinants of national innovative capacity by estimating knowledge production function. In the second model, we examined the impact of national innovative capacity and technological advancement on TFP growth. The third model was used to understand the overall association between innovative output and TFP. The particular emphasis of analysis was placed on intangible and knowledge based factors, such as research and development and information and communication technology, exposure to external technology, governance, patents, trademarks, industrial designs and number of articles published to analyze the association among innovative capacity, technological advancement and total factor productivity growth. For this purpose, the indices of innovative output (IQ), TFP, information & communication technology (ICT), exposure to external technology (EET) and financial deepening (FD) were constructed by using the appropriate statistical and mathematical procedure. The present study provided a framework to measure and compare the innovative performance of countries at national level. We used a panel of 22 countries in two groups for the period from 1996 to 2015 for making comparative analysis with particular emphasis to learn from experiences of high-tech OECD economies. The fist group consisted of technologically advanced OECD countries and the second consisted of Asian growing economies. The empirical analysis of this research is based on econometric estimation. The fixed effects with robust standard errors econometric technique was used for estimation of the models. The estimates obtained through this method are robust and arbitrarily accommodate the contemporaneous (cross-sectional) correlation, within cross-section serial correlation and heteroskedasticity. A variety of diagnostics tests, such as Redundant fixed effects test, Lagrange Multiplier tests for Random Effects and Correlated Random Effects - Hausman test were used for selection of the best and appropriate model and estimation technique. Moreover, Fully Modified Least Squares (FMOLS) and Dynamic Least Squares (DOLS) were also used to check the sensitivity of results. The panel Granger causality test was used to examine the direction of causality and panel PMG/ARDL approach was applied to judge long run association between national innovative capacity and TFP. The construction of index and statistical analysis of national innovative capacity, technological advancement and productivity in the present research was an essential step for understanding relative position of economies regarding these capabilities. The average values of IQ, ICT and TFP indices showed increasing trends in both cases over the 1996-2015 period. According to the results of indices, the most of low scoring countries were from Asia as compared to OECD countries. Among the whole group of 22 countries included in the study, most of Asian economies, such as Pakistan, India, Thailand, China, Turkey and Malaysia had low value of ICT and IQ indices as compared to OECD economies. The increasing trend of ICT index showed rapid penetration rate of this technology in OECD countries as compared to Asian ii economies. The given estimates of three indices also revealed that difference of ICT adoption and innovative performance decreased between OECD and Asian economies over time which bears the evidence of convergence. The research also examined the innovative and technological capabilities of selected countries by analyzing the intellectual property indicators (patent, trademark, industrial design and scientific and technical publication), innovative efficiency, ICT indicators (ICT penetration and adoption) and high-technology exports as a percentage of total manufacturing exports. The regional trends of patents, trademarks and industrial designs demonstrated that Asia is the leading region having rapidly growing trend especially during the last two decades. Japan and USA were found to be the leading countries from OECD and China was found to be leading country from Asia in terms of most of the innovative indicators. The information revealed that Asian region had started to move toward knowledge based economy but the productive benefits can be achieved by sustaining this trend over time. The results suggested that the core variables of estimated models remained significant with expected sing. The results demonstrated that main drivers of national innovative capacity were also critical determinants of TFP growth suggesting that enhancement in TFP is closely associated with the improvement of national innovative capacity. The overall results demonstrated that R&D expenditure, Human capital, Exposure to external technology and financial development were found to be the important determinants of national innovative capacity and TFP growth. Information & Communication Technology (ICT) and governance yielded positive and significant impact on TFP growth of both panels of countries whereas governance and per capita income appeared to have significant role in promoting national innovative capacity of Asian growing economies. Exposure to external technology played a vital role in promoting innovation and productivity only if it was properly absorbed and utilized by the host countries. The results of panel Granger causality test suggested that innovative output Granger caused TFP growth and yielded positive and significant impact on TFP growth. PMG/ARDL approach also suggested that innovative output had significant positive influence on TFP over long run. The error correction coefficient having significant negative value showed convergence to equilibrium demonstrated stable long run relationship. This further confirmed that innovations played an important role in promoting productivity there was a stable long run relationship. Estimated results of all models found robust to alternative estimation approaches. Findings of the research enable us to suggest a number of policy implications and recommendations with a general relevance as well as specific to Asian growing economies. The policy measures recommended by this research will surely be helpful in enhancing innovative capacity, technological advancement and in this way in raising the productivity. This will lead to achieve sustainable economic growth and helpful to reduce the incidence of poverty in developing countries.
Gov't Doc #: 20717
Appears in Collections:PhD Thesis of All Public / Private Sector Universities / DAIs.

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