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Innovation Spillovers, Economic Growth, and the Role of Absorptive Ability

Author

Listed:
  • Muhammad USMAN

    (National University of Modern Languages, Islamabad, Pakistan)

  • Lal Khan ALMAS

    (West Texas A&M University, Canyon, United States of America)

  • Shoaib HASSAN

    (National University of Modern Languages, Islamabad, Pakistan)

Abstract

Research and Development (R&D) based economic sustainability is the current debate in endogenous growth framework to solve the problem of production inefficiency to achieve economic stability. The high Total Factor Productivity (TFP) growth can be attained through technological innovation, reverse engineering, ‘learning by doing’, artificial intelligence, and interaction of the researchers around the world. The adoption of foreign and domestic R&D innovation and its spillovers are relying on the willingness to opt, financial capital, and knowledge capital. The rationale of this study is to examine the importance of R&D spillovers for stable economic growth (EG) through the channel of knowledge diffusion in Pakistan. This research theme has been designed to investigate the proficiency of R&D diffusions in the absorptive capacity of the Pakistani labour force and the efficiency to progenitive utilization of R&D innovation. Quantitative analysis is carried out through the yearly time series data covering the period of 1972 to 2022. The Translog and Cobb Douglas production functions were employed to measure the TFP growth and Autoregressive Distributive Lagged (ARDL) Model was applied for empirical analysis. The quantitative analysis provided evidence of the presence of foreign and domestic R&D innovation spillovers and adoption in Pakistan with poor absorptive capacity. The study has indicated that foreign R&D spillovers have an affirmative role in TFP growth compared to domestic R&D. A great deal of policy wisdom has been generated, which directs that government should focus on sustainable policies related to local R&D, R&D spillovers with sufficient and sustainable R&D expenditures, their availability, and accessibility of innovation to boost the resource efficacy for higher TFP growth. The government should emphasise the implementation of extension services to educate workers by demonstrating the effectiveness of early adoption of innovation, innovative technology, and artificial intelligence (AI) to achieve sustainable productivity.

Suggested Citation

  • Muhammad USMAN & Lal Khan ALMAS & Shoaib HASSAN, 2024. "Innovation Spillovers, Economic Growth, and the Role of Absorptive Ability," PROCEEDINGS OF THE INTERNATIONAL CONFERENCE ON ECONOMICS AND SOCIAL SCIENCES, Bucharest University of Economic Studies, Romania, vol. 6(1), pages 923-950, August.
    • Handle: RePEc:rom:conase:v:6:y:2024:i:1:p:923-950
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    More about this item

    Keywords

    research and development spending; spillovers; knowledge capital; absorptive ability; TFP growth; time series analysis.;
    All these keywords.

    JEL classification:

    • O32 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Management of Technological Innovation and R&D
    • O34 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Intellectual Property and Intellectual Capital
    • O30 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - General
    • L2 - Industrial Organization - - Firm Objectives, Organization, and Behavior
    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models
    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes

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