Effects of Science, Technology, and Innovation Official Development Assistance on Innovative Capacity in Developing Countries

Abstract

This study aims to empirically investigate the effect of Science, Technology, and Innovation Official Development Assistance (STI ODA) on the innovative capacity of developing countries. Particularly, this study attempted to examine the moderating effects of R&D investment and its effect on innovative capacity. To do this, a panel fixed model analysis was carried out with ODA and macroeconomic data on 84 developing countries from 2002 to 2018. The findings indicated that STI ODA was found to have no direct positive effect on innovative capacity. However, it had a positive effect on innovative capacity when the moderating effect of R&D investment was significant and when the proportion of R&D investment increased. The findings of this study serve as a guide for policymakers in terms of having better understanding of the relationship between STI ODA, R&D investment, and innovative capacity. Hence, policy makers and practitioners are able to design a good policy to be adopted such that absorptive capacity should be prioritized for STI ODA to be effective in helping developing countries to escape poverty and achieve sustainable development goals. To the best of the authors’ knowledge, this paper is the first of its kind to analyze the moderating effect of R&D investment on the relationship between STI ODA and innovative capacity in a developing country context.