Research and development, innovation inputs and productivity; The role of National Innovation Systems

Innovation outcomes are typically linked to measurable resources such as R&D expenses and the number of researchers. However, we show that innovation outcomes are also significantly influenced by the National Innovation System, an aspect often overlooked in the existing literature. The National Innovation System encompasses challenging-to-measure resources such as the amount of staff training, the extent of university-industry or cross-industry collaboration, and the level of intellectual property rights. We demonstrate, using a Data Envelopment Analysis model, that cross-country differences in National Innovation Systems account for a significant share of relative inefficiencies in producing innovation from typical innovation inputs. This finding suggests that countries can support long-term economic growth by simply fostering and advancing a National Innovation System.