The Effect of R&D Expenditure on Innovation: Evidence from 12 Countries in the Eurozone
Abstract
This study empirically investigates the causal relationship between innovation (as estimated by the number of patent applications) and Research & Development (R&D) expenditure in a group of twelve euro zone countries during the period 1994-2013. The study is based on the endogenous growth theory (Grossman & Helpman, 1991; Jones, 1995b). Panel data analysis shows that there is a cointegration relationship between innovation, domestic and foreign R&D expenditure. Furthermore, there is a positive and statistically important effect of domestic and foreign R&D expenditure on innovation. In addition, there are signs of bilateral long-term Granger causality in all the pairs of examined variables. The findings indicate the existence of positive externalities and R&D diffusion among euro zone countries and underline the importance of intensifying efforts for the enhancement of innovation in the EU.
Article Details
- Issue
- Vol. 1 (2016)
- Section
- Εισηγήσεις