Innovation and Productivity: A Case Study of Developing Countries

One of the critical factors affecting productivity is innovation and technology. In fact, innovation is necessary to increase productivity, and the transformation of new ideas into new economic solutions (new products, processes, and services) is the basis of sustainable competitive advantages for companies. Many studies have investigated the relationship between productivity and innovation. Some of these studies have found a positive relationship between innovation and productivity, and some have not found a significant relationship between the two. According to the recent contents, this study seeks to examine the relationship between innovation and productivity in developing countries. For this purpose, the panel data method has been used for the period from 2011 to 2019. The results of the model show that innovation and productivity have a positive and significant relationship. The estimated parameter of innovation is equal to 0.16, which indicates that a one percent increase in innovation increases productivity by 0.16 percent. It will be like increasing competition and improving quality through factors influencing innovation, such as research and development, production and knowledge collaboration. Therefore, to strengthen productivity, it is suggested to focus more on the variable components of innovation, increasing research and development in institutions and enterprises, investing in the education and training of specialized human resources, and networks to create and collaborate knowledge between enterprises. Also, the Frontier technology readiness index has a positive and significant effect on productivity. Technological readiness creates prosperity and new job opportunities, as well as increases the competitiveness of industries in the domestic and international arena, and its positive effect is in accordance with the theoretical expectation of the research. The estimated coefficient of this index is equal to 0.06, and with a one percent positive change in the index, productivity increases by 0.06 percent.