Innovation and Regional Economic Growth in Russia: Roles of Trade Integration, Sanctions and Investment Potential

Innovation plays a vital role for economic growth as it introduces new ideas and processes, fosters competitiveness, creates jobs, and triggers technological advancements, increasing productivity and efficiency. Russia’s transition from a command to market economy requires the country to stress on innovation for sustainable regional economic growth. This study delves into the reciprocal relationship between innovation and economic progress in various Russian regions, emphasizing the significance of trade integration (Russia's admission to the WTO), the 2014 sanctions, and the investment potential within Russia's territories. Owing to the significant inconsistencies in data across different regions and over time, this research utilizes the Method of Moments Quantile Regression (MMQR) for data interpretation. The main findings reveal that regional innovation is a key driver of economic advancement in the Russian Federation, particularly in the lower and middle quantiles. Additionally, this research indicates that the effect of innovation on regional economic growth is amplified following Russia's WTO membership. In addition, this study observes that during sanctions, innovation promoted economic growth in the Russian regions. However, sanctions in general negatively affected the economic growth of the more developed regions of Russia. Furthermore, this research notes a robust correlation between innovation and economic growth in Russian territories with substantial investment potential. The study also identifies that factors like financial development, fixed capital accumulation, and exports significantly enhance economic growth through innovation in the Russian regions. This study significantly contributes to literature from both theoretical and practical standpoints by offering several fresh insights regarding regional economic growth of Russia.