Institutional quality and innovation: some cross-country evidence

Christopher John Boudreaux (AR Sanchez Jr. School of Business, Texas A&M International University, Laredo, Texas, USA)

Journal of Entrepreneurship and Public Policy

ISSN: 2045-2101

Publication date: 10 April 2017

Abstract

Purpose

The purpose of this paper is to examine the cross-country variation in innovation and propose that it can be explained by the presence of market institutions using the Global Innovation Index.

Design/methodology/approach

This paper uses ordinary least squares with region and OECD fixed effects to test whether more economic freedom is associated with more innovation.

Findings

The findings reveal that the effect of market institutions on innovation is promoted by both knowledge and creativity. When innovation is broken down into its component measures, the results suggest that a high-quality legal system is associated with more creativity and free trade is associated with greater knowledge.

Originality/value

These findings provide evidence that economic freedom matters for innovation through both creativity and knowledge, particularly through the protection of property rights and the legal system and free trade. Policy makers desiring to spur innovation may want to examine the level of freedom in private ownership and the reduction of trade barriers as a prerequisite for innovation policy.

Keywords

Acknowledgements

The authors would like to thank two anonymous referees for their excellent advice and comments on a previous draft of this paper. Any remaining errors are the authors’ own.

Citation

Boudreaux, C. (2017), "Institutional quality and innovation: some cross-country evidence", Journal of Entrepreneurship and Public Policy, Vol. 6 No. 1, pp. 26-40. https://doi.org/10.1108/JEPP-04-2016-0015

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Publisher

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Emerald Publishing Limited

Copyright © 2017, Emerald Publishing Limited

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