Threshold effects in the patent-growth relationship: a PSTR approach for 60 developed and developing countries

ABSTRACT

This study analyzes whether there is a threshold effect in the innovation-growth relationship. Using data from the period 2008–2017, we perform an analysis using 60 countries in the whole sample and a split-sample analysis in which we separate developed countries (36) from developing countries (24). The results for the panel smooth transition regression (PSTR) model indicate that there is a threshold effect in the innovation-growth relationship. We find that below the threshold, the effect of innovation measured by the number of patents is not significant for developed and developing countries. However, surpassing the optimal threshold, the effect becomes positive only for the whole sample and developed countries. Furthermore, findings also indicate that research and development expenditure, domestic and foreign investments stimulate economic growth.

KEYWORDS:

• Innovation
• patents
• growth
• PSTR analysis
• developed and developing countries

JEL CLASSIFICATION:

• E44
• O33
• O41

Disclosure statement

No potential conflict of interest was reported by the authors.

Notes

¹ These countries are listed in Appendix 1.

² For more details, see this patent statistical profile at this link https://www.wipo.int/ipstats/en/statistics/country_profile/profile.jsp?code=NL.

³ As the numbers of patents are in logarithm, the equivalent number of patents is obtained by application of the exponential function.

⁴ As the numbers of patents are in logarithm, to search the exact value of threshold, we must practice the exponential function to the constant (C) to get the necessary threshold for patents.