The information revolution, innovation diffusion and economic growth: an examination of causal links in European countries
- 39 Downloads
Abstract
Over the last 5 decades, the economic landscape in Europe has been transformed rapidly due to innovation, digitisation of the economy, and emergence of new sources of growth. However, the complex dynamics among diffusion of innovation, penetration of information and communication technology (ICT), and economic growth have not been adequately studied. This paper investigates the relationships among these three variables for European countries over 1961–2016. The goal is to determine whether the direction of causality among the variables runs both ways, one way, or not at all. Using a vector error-correction model, we find that in the long run, both innovation diffusion and ICT penetration stimulate economic growth. In the short run, however, the causal links are not always uniform and depend on proxies that are used for innovation diffusion and ICT penetration. The results provide valuable insights on the types of policies and strategies that would sustain economic growth in European economies.
Keywords
Innovation diffusion ICT penetration Economic growth VECMJEL Classification
O43 O16 E44 E31Notes
Acknowledgements
The authors thank the editor and two anonymous reviewers of this journal for their helpful comments, which have improved the overall quality of this paper.
References
- Adak, M.: Technological progress, innovation and economic growth; the case of Turkey. Procedia Soc. Behav. Sci. 195, 776–782 (2015)CrossRefGoogle Scholar
- Agenor, P., Neanidis, K.C.: Innovation, public capital, and growth. J. Macroecon. 44(1), 252–275 (2015)CrossRefGoogle Scholar
- Ahmed, E.M., Krishnasamy, G.: Telecommunications investment and economic growth in ASEAN 5: an assessment from UECM. N. Z. Econ. Pap. 46(3), 315–332 (2012)Google Scholar
- Andergassen, R., Nardini, F., Ricottilli, M.: Innovation diffusion, general purpose technologies and economic growth. Struct. Change Econ. Dyn. 40, 72–80 (2017)CrossRefGoogle Scholar
- Arvanitis, S., Loukis, E., Diamantopoulou, V.: The effect of soft ICT capital on innovation performance of Greek firms. J. Enterp. Inf. Manag. 26(6), 679–701 (2013)CrossRefGoogle Scholar
- Arvin, M., Pradhan, R.: Broadband penetration and economic growth nexus: evidence from cross-country panel data. Appl. Econ. 46(35), 4360–4369 (2014)CrossRefGoogle Scholar
- Avgerou, C.: Information systems in developing countries: a critical research review. J. Inf. Technol. 23(3), 133–146 (2008)CrossRefGoogle Scholar
- Bagchi, K., Kirs, P., Lopez, F.: The impact of price decreases on telephone and cell phone diffusion. Inf. Manag. 45(3), 183–193 (2008)CrossRefGoogle Scholar
- Bayo-Moriones, A., Lera-Lopez, F.: A firm-level analysis of determinants of ICT adoption in Spain. Technovation 27(6–7), 352–366 (2007)CrossRefGoogle Scholar
- Beil, R.O., Ford, G.S., Jackson, J.D.: On the relationship between telecommunications investment and economic growth in the United States. Int. Econ. J. 19(1), 3–9 (2005)CrossRefGoogle Scholar
- Brenner.: Science, innovation and national growth. Working Papers on Innovation and Space, No 2014-03, Philipps University Marburg, Department of Geography, Marburg (2014)Google Scholar
- Cardona, M., Kretschmer, T., Strobel, T.: ICT and productivity: conclusions from the empirical literature. Inf. Econ. Policy 25(3), 109–125 (2013)CrossRefGoogle Scholar
- Cetin, M.: The hypothesis of innovation-based economic growth: a causal relationship. Uluslararası İktisadi ve İdari İncelemeler Dergisi 11(6), 1–16 (2013)Google Scholar
- Chakraborty, C., Nandi, B.: Privatization, telecommunications and growth in selected Asian countries: an econometric analysis. Commun. Strateg. 52(3), 31–47 (2003)Google Scholar
- Chakraborty, C., Nandi, B.: Telecommunication adoption and economic growth in developing countries: do levels of development matter. J. Acad. Bus. Econ. 9(2), 51–61 (2009)Google Scholar
- Chakraborty, C., Nandi, B.: Mainline telecommunications infrastructure, levels of development and economic growth: evidence from a panel of developing countries. Telecommun. Policy 35(1), 441–449 (2011)CrossRefGoogle Scholar
- Chen, D.H.C., Kee, H.L.: A model on knowledge and endogenous growth. World Bank Policy Research Working Paper, No. 3539. The World Bank, Washington DC (2005)Google Scholar
- Cieslik, A., Kaniewsk, M.: Telecommunications infrastructure and regional economic development: the case of Poland. Reg. Stud. 38(6), 713–725 (2004)CrossRefGoogle Scholar
- Cronin, F.J., Parker, E.B., Colleran, E.K., Gold, M.A.: Telecommunications infrastructure and economic growth: an analysis of causality. Telecommun. Policy 15(6), 529–535 (1991)CrossRefGoogle Scholar
- Cronin, F.J., Colleran, E.K., Herbert, P.L., Lewitzky, S.: Telecommunications infrastructure investment and economic development. Telecommun. Policy 17(6), 415–430 (1993a)CrossRefGoogle Scholar
- Cronin, F.J., Colleran, E.K., Herbert, P.L., Lewitzky, S.: Telecommunications and growth: the contribution of telecommunications infrastructure investment to aggregate and sectoral productivity. Telecommun. Policy 17(9), 677–690 (1993b)CrossRefGoogle Scholar
- Cuervo, M.R.V., Menendez, A.J.L.: A multivariate framework for the analysis of the digital divide: evidence from the European Union-15. Inf. Manag. 43(6), 756–766 (2006)CrossRefGoogle Scholar
- Dedrick, J., Gurbaxani, V., Kraemer, K.L.: Information technology and economic performance: a critical review of the empirical evidence. ACM Comput. Surv. 35(1), 1–28 (2003)CrossRefGoogle Scholar
- Dutta, A.: Telecommunications and economic activity: an analysis of Granger causality. J. Manag. Inf. Syst. 17(4), 71–95 (2001)CrossRefGoogle Scholar
- Dutta, S., Shalhoub, Z.K., Samuels, G.: Promoting technology and innovation: recommendations to improve Arab ICT competitiveness. The Arab World Competitiveness Report, pp. 81–96. World Economic Forum, Geneva (2007)Google Scholar
- Engle, R.F., Granger, C.W.J.: Cointegration and error correction: representation. Estim. Test. Econom. 55(2), 251–276 (1987)Google Scholar
- Fagerberg, J.: Innovation: a guide to the literature. In: Fagerberg, J., Mowery, D.C., Nelson, R.R. (eds.) The Oxford Handbook of Innovation, pp. 1–26. Oxford University Press, New York (2005)Google Scholar
- Fan, P.: Innovation capacity and economic development: China and India. Econ. Change Restruct. 44(1–2), 49–73 (2011)CrossRefGoogle Scholar
- Freeman, C., Soete, L.: The Economics of Industrial Innovation. MIT Press, Cambridge (1997)Google Scholar
- Galindo, M., Mendez, M.T.: Entrepreneurship, economic growth, and innovation: are feedback effects at work. J. Bus. Res. 67(5), 825–829 (2014)CrossRefGoogle Scholar
- Geissbauer, R., Vedso, J., Schrauf, S.: Industry 4.0: building the digital enterprise, PwC. www.pwc.com/industry40 (2016)
- Ghosh, S., Prasad, R.: Telephone penetrations and economic growth: evidence from India. Netnomics 13(1), 25–43 (2012)CrossRefGoogle Scholar
- Grossman, G., Helpman, E.: Innovation and Growth in the Global Economy. MIT Press, Cambridge (1991)Google Scholar
- Grossman, G.M., Helpman, E.: Endogenous innovation in the theory of growth. J. Econ. Perspect. 8(1), 23–44 (1994)CrossRefGoogle Scholar
- Guloglu, B., Tekin, R.B.: A panel causality analysis of the relationship among research and development, innovation, and economic growth in high-income OECD countries. Eurasian Econ. Rev. 2(1), 32–47 (2012)Google Scholar
- Hasan, I., Tucci, C.L.: The innovation-economic growth nexus: global evidence. Res. Policy 39(10), 1264–1276 (2010)CrossRefGoogle Scholar
- Howells, J.: Innovation and regional economic development: a matter of perspective? Res. Policy 34(8), 1220–1234 (2005)CrossRefGoogle Scholar
- Hudson, J., Minea, A.: Innovation, intellectual property rights, and economic development: a unified empirical investigation. World Dev. 46(3), 66–78 (2013)CrossRefGoogle Scholar
- Jin, S., Cho, C.M.: Is ICT a new essential for national economic growth in an information society? Gov. Inf. Q. 32(3), 253–260 (2015)CrossRefGoogle Scholar
- Jha, A.K., Bose, I.: Innovation research in information systems: a commentary on contemporary trends and issues. Inf. Manag. 53(3), 297–306 (2016)CrossRefGoogle Scholar
- Kaneva, M., Untura, G.: Innovation indicators and regional growth in Russia. Econ. Change Restruct. 50(2), 133–159 (2016)CrossRefGoogle Scholar
- Kao, C., Chiang, M.H.: On the estimation and inference of a cointegrated regression in panel data. Adv. Econom. Nonstation. Panels Panel Cointegr. Dyn. Panels 15(1), 179–222 (2000)CrossRefGoogle Scholar
- Kaplinsky, R., Chataway, J., Clark, N., Hanlin, R., Kale, D., Muraguri, L., Papaioannou, T., Robbins, P., Wamae, W.: Below the radar: what does innovation in emerging economies have to offer other low-income economies? Int. J. Technol. Manag. Sustain. Dev. 8(3), 177–197 (2009)CrossRefGoogle Scholar
- Kim, J., Lee, S.: Patent databases for innovation studies: a comparative analysis of USPTO, EPO, JPO and KIPO. Technol. Forecast. Soc. Change 92(1), 332–345 (2015)CrossRefGoogle Scholar
- Kirchhoff, B., Catherine, A., Newbert, S.L., Hasan, I.: The influence of university R&D expenditures on new business formations and employment growth. Entrep. Theory Pract. 31(4), 543–559 (2007)CrossRefGoogle Scholar
- Lam, P.L., Shiu, A.: Economic growth, telecommunication development and productivity growth of the telecommunication sector: evidence around the world. Telecommun. Policy 34(4), 185–199 (2010)CrossRefGoogle Scholar
- Lantz, J.S., Sahut, J.M., Teulon, F.: What is the real role of corporate venture capital? Int. J. Bus. 16(4), 368–382 (2011)Google Scholar
- Larsson, Rolf, Lyhagen, Johan, Lothgren, Mickael: Likelihood-based cointegration tests in heterogeneous panels. Econom. J. 4, 109–142 (2001)CrossRefGoogle Scholar
- Lee, J.W.: Empirical evidence of causality between information communications technology and economic growth in China, Japan and South Korea. In: Yi, E., Chang, T. (eds.) Proceedings of the 11th International Decision Sciences Institute and the 16th Asia-Pacific Decision Sciences Institute Joint Meeting, FA 1-1-7. Taipei, Taiwan (2011)Google Scholar
- Lee, S.H., Levendis, J., Gutierrez, L.: Telecommunications and economic growth: an empirical analysis of Sub-Saharan Africa. Appl. Econ. 44(4), 461–469 (2012)CrossRefGoogle Scholar
- MacDougall, W.: Industrie 4.0: Smart Manufacturing for the Future. German Trade & Invest, Berlin (2014)Google Scholar
- Majeed, M.T., Khan, F.N.: Do information and communication technologies (ICTs) contribute to health outcomes? An empirical analysis. Qual. Quantity (2018). https://doi.org/10.1007/s11135-018-0741-6 CrossRefGoogle Scholar
- Malerba, F., Brusoni, S.: Perspectives on Innovation. Cambridge University Press, Cambridge (2007)CrossRefGoogle Scholar
- Maradana, R.P., Pradhan, R.P., Dash, S., Gaurav, K., Jayakumar, M., Chatterjee, D.: Does innovation promote economic growth? Evidence from European countries. J. Innov. Entrep. 6(1), 1–23 (2017)CrossRefGoogle Scholar
- Mehmood, B., Siddiqui, W.: What causes what? Panel cointegration approach on investment in telecommunications and economic growth: case of Asian countries. Romanian Econ. J. 16(47), 3–16 (2013)Google Scholar
- Mithas, S., Ramasubbu, N., Sambamurthy, V.: How information management capability influences firm performance. MIS Q. 35(1), 237–256 (2011)CrossRefGoogle Scholar
- OECD: Economics Policy Reforms 2005: Going for Growth. OECD, Paris (2005)CrossRefGoogle Scholar
- OECD: Handbook on Constructing Composite Indicators: Methodology and User Guide. Organization for Economic Cooperation and Development (OECD) Publishing, Paris (2008)Google Scholar
- OECD: OECD Information Technology Outlook 2010. Organisation for Economic Co-Operation and Development (OECD), Paris (2010)Google Scholar
- Pedroni, P.: Fully modified OLS for heterogeneous cointegrated panels. Adv. Econom. 15(1), 93–130 (2000)CrossRefGoogle Scholar
- Pradhan, R.P., Bele, S., Pandey, S.: Internet-growth nexus: evidence from cross country panel data. Appl. Econ. Lett. 20(16), 1511–1515 (2013a)CrossRefGoogle Scholar
- Pradhan, R.P., Bele, S., Pandey, S.: The link between telecommunication infrastructure and economic growth in 34 OECD countries. Int. J. Technol. Policy Manag. 13(3), 278–293 (2013b)CrossRefGoogle Scholar
- Pradhan, R.P., Arvin, M.B., Norman, N.R., Bele, S.K.: Economic growth and the development of telecommunications infrastructure in the G-20 countries: a panel-VAR approach. Telecommun. Policy 38(7), 634–649 (2014a)CrossRefGoogle Scholar
- Pradhan, R.P., Arvin, M.B., Bahamani, S., Norman, N.R.: The development of telecommunications infrastructure and economic growth: using causality and missing variables for the G-20 countries, 2001–2012. J. Comp. Policy Anal. 16(5), 401–423 (2014b)Google Scholar
- Pradhan, R.P., Arvin, M.B., Norman, N.R.: The dynamics of information and communications technologies infrastructure, economic growth, and financial development: evidence from Asian countries. Technol. Soc. 42(1), 135–149 (2015)CrossRefGoogle Scholar
- Pradhan, R.P., Arvin, M.B., Hall, J.H.: Economic growth, development of telecommunications infrastructure, and financial development in Asia, 1991–2012. Q. Rev. Econ. Finance 59(C), 25–38 (2016a)CrossRefGoogle Scholar
- Pradhan, R.P., Arvin, M.B., Mittal, J., Bahmani, S.: Relationships between telecommunications infrastructure, capital formation, and economic growth. Int. J. Technol. Manag. 70(2–3), 157–176 (2016b)CrossRefGoogle Scholar
- Pradhan, R.P., Arvin, M.B., Hall, J.H., Nair, M.: Innovation, financial development, and economic growth in Eurozone countries. Appl. Econ. Lett. 23(16), 1141–1144 (2016c)CrossRefGoogle Scholar
- Pradhan, R.P., Arvin, M.B., Nair, M., Mittal, J., Norman, N.R.: Telecommunications infrastructure and usage and the FDI-growth nexus: evidence from Asian-21 countries. Inf. Technol. Dev. 23(2), 235–260 (2017a)CrossRefGoogle Scholar
- Pradhan, R.P., Arvin, M.B., Bahmani, S., Bennett, S.E.: The innovation-growth link in OECD countries: could other macroeconomic variables matter? Technol. Soc. 51, 113–123 (2017b)CrossRefGoogle Scholar
- Pradhan, R.P., Arvin, M.B., Nair, M., Bennett, S.E., Bahmani, S.: Short-term and long-term dynamics of venture capital and economic growth in a digital economy: a study of European countries. Technol. Soci. (2018). https://doi.org/10.1016/j.techsoc.2018.11.002 CrossRefGoogle Scholar
- Ramlan, J., Ahmed, E.M.: Information and communication technology (ICT) and human capital management trend in Malaysia’s economic development. Appl. Econ. Lett. 16(18), 1881–1886 (2009)CrossRefGoogle Scholar
- Roller, L., Waverman, L.: Telecommunications infrastructure and economic development: a simultaneous approach. Am. Econ. Rev. 91(4), 909–923 (2001)CrossRefGoogle Scholar
- Sadraoui, T., Ali, T.B., Deguachi, B.: Economic growth and international R&D cooperation: a panel Granger causality analysis. Int. J. Econom. Financ. Manag. 2(1), 7–21 (2014)Google Scholar
- Sassi, S., Goaied, M.: Financial development, ICT diffusion and economic growth: lessons from MENA region. Telecommun. Policy 37(4–5), 252–261 (2013)CrossRefGoogle Scholar
- Schumpeter, J.A.: The Theory of Economic Development. Harvard University Press, Cambridge (1911)Google Scholar
- Schumpeter, J.A.: Business Cycles: A Theoretical, Historical and Statistical Analysis of the Capitalist Process. McGraw-Hill, New York (1939)Google Scholar
- Shahiduzzaman, M., Alam, K.: Information technology and its changing roles to economic growth and productivity in Australia. Telecommun. Policy 38(2), 125–135 (2014)CrossRefGoogle Scholar
- Shiu, A., Lam, P.L.: Causal relationship between telecommunications and economic growth in China and its regions. Reg. Stud. 42(5), 705–718 (2008a)CrossRefGoogle Scholar
- Shiu, A., Lam, P.L.: Causal relationship between telecommunications and economic growth: a study of 105 countries. Paper presented at the 17th Biennial Conference of the International Telecommunications Society. Montreal, 24–27 June (2008b)Google Scholar
- Sinha, D.: Patents, innovations and economic growth in Japan and South Korea: evidence from individual country and panel data. Appl. Econom. Int. Dev. 8(1), 181–188 (2008)Google Scholar
- Spanos, Y.E., Prastacos, G.P., Poulymenakou, A.: The relationship between information and communication technologies adoption and management. Inf. Manag. 39(8), 659–675 (2002)CrossRefGoogle Scholar
- Veeramacheneni, B., Ekanayake, E.M., Vogel, R.: Information technology and economic growth: a causal analysis. Southwest. Econ. Rev. 34(1), 75–88 (2007)Google Scholar
- Veugelers, R.: An innovation deficit behind Europe’s overall productivity slowdown? In: Investment and Growth in Advanced Economies Conference Proceedings, European Central Bank Forum on Central Banking, 26–28 June 2017, Sintra, Portugal. Retrieved from: https://www.ecb.europa.eu/pub/pdf/other/ecb.ecbforumcentralbanking2017.en.pdf, on 28 September 2018
- Vu, K.M.: Information and communication technology (ICT) and Singapore’s economic growth. Inf. Econ. Policy 25(4), 284–300 (2013)CrossRefGoogle Scholar
- Wong, T.Y.T., Peko, G., Sundaram, D., Piramuthu, S.: Mobile environments and innovation co-creation processes and ecosystems. Inf. Manag. 53(3), 336–344 (2016)CrossRefGoogle Scholar
- World Bank: Engendering ICT: Ensuring Gender Equality in ICT for Development. The World Bank, Washington (2003a)Google Scholar
- World Bank: ICT and MDGs: A World Bank Group Perspective. The World Bank, Washington (2003b)Google Scholar
- Yang, C.: Is innovation the story of Taiwan’s economic growth? J. Asian Econ. 17(5), 867–878 (2006)CrossRefGoogle Scholar
- Yoo, S.H., Kwak, S.J.: Information technology and economic development in Korea: a causality study. Int. J. Technol. Manag. 27(1), 57–67 (2004)CrossRefGoogle Scholar
- Zahra, K., Azim, P., Mahmood, A.: Telecommunications infrastructure development and economic growth: a panel data approach. Pak. Dev. Rev. 47(4), 711–726 (2008)CrossRefGoogle Scholar
- Zaman, K., Izhar, Z., Khan, M.M., Ahmad, M.: The relationship between financial indicators and human development in Pakistan. Econ. Model. 29(5), 1515–1523 (2012)CrossRefGoogle Scholar
- Zhang, F., Li, D.: Regional ICT access and entrepreneurship: evidence from China. Inf. Manag. 55(2), 188–198 (2018)CrossRefGoogle Scholar