Is Innovation the Engine of Economic Growth? A Cross-Country Analysis

Purpose: The aim of this study is to examine the existence and differentiation of the impact of innovation on economic growth across country groups through a panel data analysis covering 93 countries between 2011 and 2023. The research investigates whether innovation affects economic growth and whether this effect varies according to country income groups.Methodology: Data from the World Bank and the Global Innovation Index (GII) were used in the study, and empirical analyses were conducted using Ordinary Least Squares (OLS) and Fully Modified Ordinary Least Squares (FMOLS) methods. The preference for panel data analysis allowed for the consideration of structural differences between countries and changes over time.Findings: The findings indicate that innovation has a significant and positive effect on economic growth. Furthermore, it was determined that the impact of innovation on growth is higher in low- and middle-income countries, while it is relatively lower in high-income countries.Originality: This study provides an original contribution to literature by comparatively analyzing the effect of innovation on economic growth across country groups. The results reveal that innovation should be at the center of development policies to achieve sustainable growth goals.