Innovation and role of corruption and diversity

Abstract

Research has established that various socioeconomic and institutional factors affect the rate of country-level innovation. However, little attention has been given to the effects of corruption and cultural diversity on innovation in cross-country analyses. It is widely accepted that innovation is a major engine of national economic growth, and policy makers and business leaders have recognized the need to create environments that foster innovative activities. This study builds on previous research using the Global Innovation Index ( GII, 2009 ) to empirically explore the impact of corruption and its interactive relationship with economic development, in addition to the effect of three different measures of diversity on country-level innovation. The results of this analysis suggest that corruption significantly harms innovation activities across countries, but the effect is mitigated in wealthier countries. As expected, ethnic diversity weakens innovation activities; however, religious diversity, which can be a proxy for tolerance, is found to positively contribute to innovation.