The innovation and economic growth

Abstract

A new race for global economic advantage is under way. It is a fierce race that only the most innovative nations will win. The first paper in series “The innovation and economic growth” has clearly denoted the leader role of Estonia in raising the investments in R&D sector and boosting their innovative export-oriented production. The present paper is a second in series and presents a nonlinear regressive analysis of whole chain of innovation driving factors, starting from the investments in R&D and leading up to the boost of innovative export-oriented production in Estonia. The dynamic structures and time-series of outstanding driving factors are presented to disclose the Estonian leadership in Baltic States. The main conclusions and suggestions are presented. The first conclusion is that a high-tech R&D based innovation matters at the later stages of economic development, when there are barely both factors of competitiveness and learning that allow for completing the “catch-up” processes clearly observed in Estonia. The next is that the present regressive analysis clearly shows that the governmentbacked R&D policies retaining the growing levels of main innovation driving factors are really correct and warrant a high future grow of production in question. Actually the coming level of Estonian innovative exportoriented production was econometrically estimated to grow at 15.2% in 2014 ever after. The practical implication of these findings for companies are that in order to improve performance they must avoid narrowly focusing on R&D, but must invest more in capabilities to commercialize technologies resulting from the R&D. The suggestion to continue the regressive analysis on the grounds of total factor production, product market competition and concentration of the sector, and knowledge diffusion in productivity improvements is on the agenda of forthcoming research.