Innovation dynamics and financial stability: a European Union perspective
Abstract
We present a formal and empirical framework that links the technological capacity of a country, reflected in its National System of Innovation, with the financial constraints it faces. The paper is divided into two sections. The first one introduces a stochastic growth model based on the relative level of technological development of countries, which determines their productivity and capacity to finance innovation activities. The second section describes the empirical conditioning observed in the innovation outputs of countries determined by their financial constraints and time period relative to the economic crisis of 2008. We classify a panel sample of European Union countries according to their technological development level and find that financial stability constraints negatively affect the less developed ones, a relationship that weakens as their innovation capacity increases. We also observe that financial stability becomes significant among technologically developed countries when reacting to the exogenous shock triggered by the crisis, while laggards remain constrained through the entire 2000–2018 sample period.
Keyword : national system of innovation, technological development, innovation dynamics, financial constraints, European stability
How to Cite
Santos-Arteaga, F. J., Tavana, M., Torrecillas, C., & Di Caprio, D. (2020). Innovation dynamics and financial stability: a European Union perspective. Technological and Economic Development of Economy, 26(6), 1366-1398. https://doi.org/10.3846/tede.2020.13521
This work is licensed under a Creative Commons Attribution 4.0 International License.
References
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Fores, B., & Camison, C. (2011). The complementary effect of internal learning capacity and absorptive capacity on performance: the mediating role of innovation capacity. International Journal of Technology Management, 55, 56–81. https://doi.org/10.1504/IJTM.2011.041680
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Freeman, C. (1987). Technology policy and economic performance: Lessons from Japan. Frances Pinter.
Furman, J., Porter, M., & Stern, S. (2002). The determinants of national innovative capacity. Research Policy, 31, 899–933. https://doi.org/10.1016/S0048-7333(01)00152-4
Godin, B. (2009). National innovation system the system approach in historical perspective. Science, Technology and Human Values, 34(4), 476–501. https://doi.org/10.1177/0162243908329187
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Gorzelany-Dziadkowiec, M., Gorzelany, J., Stauskis, G., Hernik, J., Van Assche, K., & Noszczyk, T. (2019). The innovation process in local development – the material, institutional, and intellectual infrastructure shaping and shaped by innovation. Technological and Economic Development of Economy, 25(6), 1232–1258. https://doi.org/10.3846/tede.2019.11094
Greenwood, J., Hercowitz, Z., & Krusell, P. (1997). Long-run implications of investment specific-technological change. American Economic Review, 87, 342–362.
Günther, J., Kristalova, M., & Ludwig, U. (2019). Structural stability of the research and development sector in European economies crisis despite the economic crisis. Journal of Evolutionary Economics, (29), 1415–1432. https://doi.org/10.1007/s00191-019-00640-z
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Hall, B. H. (2002). The financing of research and development. Oxford Review of Economic Policy, 18(1), 35–51. https://doi.org/10.1093/oxrep/18.1.35
Hall, B. H. (2008). The financing of innovation. In S. Shane (Ed.), Handbook of technology and innovation management (pp. 409–430). Blackwell Publishers.
Iammarino, S., Sanna-Randaccio, F., & Savona, M. (2009). The perception of obstacles to innovation. Foreign multinationals and domestic firms in Italy. Revue d’économie industrielle, 125(1), 75–104. https://doi.org/10.4000/rei.3953
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