The Determinants of Innovation Performance; An Income Based Cross-Country Comparative Analysis Using Global Innovation Index(GII)

Abstract

Abstract Purpose: - Despite the dearth of research on innovation performance, the key determinants of innovation performance are still blurred. Besides, comparative research on the determinants of innovation performance among countries at different income levels: high-income, upper-middle-income, lower-middle-income, and low-income, is not common. This study is, therefore, aimed to bridge this research gap by considering the innovation performance of 63 countries. Methodology: - Participating countries were purposefully selected from the Global Innovation Index (GII) dataset. Multistage analyses were conducted: first, a linear regression was run to identify the most decisive pillars; then, stepwise regression was applied to identify the best predicting model of innovation performance; thirdly, to examine the variation in innovation performance and figure out key determinants in each country groups, the ANOVA analysis was done.Results: - Human capital and research, infrastructure, and business sophistication are the key pillars determining innovation performance in general. The best predicting variables are innovation linkage & knowledge absorption (both pertaining to business sophistication), R&D and infrastructure (inculcating both physical and digital). The human capital that promotes R&D activities is the biggest bottleneck hampering promotion of innovation in the countries and firms at lower-middle income category, whereas innovation linkage in a high-income category and both human capital that promotes R&D activities and innovation linkage in an upper-middle income category. Hence, countries and firms in these income categories should give priorities accordingly to these decisive bottlenecks hindering the innovation performance.Implication: - The result implies that country's economic growth can be defined by the level of innovation performance and the challenges of innovation vary as per the countries’ development stage. Accordingly, bottleneck factors need to be identified & addressed properly in a policy direction first at firm level and then at country level.Originality/Value: - The study claims to have extended the horizon of understanding on determinants of innovation across countries and revealed the most crucial factors in each category of countries. Further empirical comparative research can be done by stratifying firms as SMEs and Large firms in each category of countries.