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Examining the Threshold Effect of Institutional Quality
on Innovation in Selected Developed and Developing Countries
(A Panel Smooth Transition Regression Approach)
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Arash Moallemi   , Ali Nazemi ashani * , Majid Afsharirad |
| Department of Energy and Resources Economics, Faculty of Economics, Kharazmi University , Nazemi@khu.ac.ir |
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Abstract: (1 Views) |
In economic literature, institutional quality is recognized as a key determinant of innovation and economic growth, as it provides the necessary environment for innovative activities to flourish. This study examines the role of institutional quality as both a moderating and threshold variable, focusing on how factors such as investment in research and development affect innovation at different levels of institutional quality. Data from 36 developed and developing countries over the period 2000–2023 were analyzed using the panel smooth transition regression method. The results reveal the existence of a clear threshold level of institutional quality at which the relationship between key variables and innovation changes. When institutional quality is below this threshold, variables such as R&D investment, high-technology exports, and foreign direct investment negatively impact innovation. However, once institutional quality surpasses this threshold and improves, their effects become positive. In contrast, highly educated labor and GDP per capita growth show no significant impact on innovation in either regime. Therefore, the study emphasizes that improving institutional quality should be a policy priority to achieve innovation and sustainable economic growth.
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| Keywords: Research and Development, Institutional Quality, PSTR Approach, Innovation, Human Capital |
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Full-Text [PDF 1011 kb]
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Type of Study: Applicable |
Subject:
Special
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