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Quality & Quantity

, Volume 53, Issue 3, pp 1529–1563 | Cite as

The information revolution, innovation diffusion and economic growth: an examination of causal links in European countries

  • Rudra P. PradhanEmail author
  • Mak B. Arvin
  • Mahendhiran Nair
  • Sara E. Bennett
  • John H. Hall
Article

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 VECM 

JEL Classification

O43 O16 E44 E31 

Notes

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.

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Authors and Affiliations

  1. 1.Vinod Gupta School of ManagementIndian Institute of TechnologyKharagpurIndia
  2. 2.Department of EconomicsTrent UniversityPeterboroughCanada
  3. 3.School of Business and Global Asia in the 21st Century (GA21) Research PlatformMonash University MalaysiaSubang JayaMalaysia
  4. 4.College of BusinessUniversity of LynchburgLynchburgUSA
  5. 5.Department of Financial ManagementUniversity of PretoriaPretoriaRepublic of South Africa

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