Journal of the Knowledge Economy

https://doi.org/10.1007/s13132-021-00752-7

Macroeconomic Conditions, Innovation

and Competitiveness

Mohsen Mohammadi Khyareh1 · Nasrin Rostami1

Received: 2 April 2020 / Accepted: 19 January 2021

© The Author(s), under exclusive licence to Springer Science+Business Media, LLC part of Springer Nature 2021

Abstract
The main concern of policy makers in developed and developing countries today
is national competitiveness and how competitiveness can be improved. Our
contribution examines the possible impact of key macroeconomic factors on
competitiveness at the national level and aims to demonstrate how competitiveness
in emerging economies are differentially driven by the interplay between innovation
activities and macroeconomic factors. Our empirical analysis is based on the
general method of moment (GMM) panel data covering 12 years (2007–2018)
and 16 emerging countries. The main findings are obtained as (i) there exists an
unconditional positive impact of innovative activities on competitiveness; (ii) the
conditional effect of macroeconomic factors increases competitiveness; and (iii)
the net effects on competitiveness from the interactions of innovation with the
macroeconomic indicators are positive, indicating that the macroeconomic stability
can be employed to enhance the positive effect of innovation on competitiveness.

Keywords Competitiveness · Innovation · Macroeconomic indicators · GMM

Introduction

Today, companies and countries/regions live in a dynamic business environment

that is constantly changing. Competition and innovation are one of the main goals
of every enterprise and national economy. When we consider the powerful effects
of globalization and the ongoing Fourth Industrial Revolution, seeking competitive
advantage becomes especially important. Due to the availability of public data sets
provided by the World Economic Forum (WEF), we can now better understand global
competitiveness and trends in emerging countries (that is, countries that are gradually
becoming market-oriented and seeking rapid economic development) (Bruton et al.,
2008). In this context, the importance of innovation and macroeconomic environmental

* Mohsen Mohammadi Khyareh

m.mohamadi@ut.ac.ir
1
MA in Entrepreneurship Management, Gonbad Kavous University, Gonbad‑e Kavous, Iran

13
Vol.:(0123456789)
 Journal of the Knowledge Economy

conditions has recently become a buzzword among scholars and political decision
makers (GEM, 2015; WEF, 2017). In addition, depending on the macroeconomic
environment and the level of economic development, the dynamics of competitiveness
may be very different (Huggins et al., 2014; Korez-Vide & Tominc, 2016; Liu, 2017;
Gallo & Tomčíková, 2019). Therefore, in recent years, understanding the link between
the macroeconomic environment and competitiveness has become an important area
of policy discussion and research (Delgado et al., 2012). In this case, Flachenecker
(2018) and Camagni and Capello (2010) believe that competitiveness is encouraged
by a variety of factors, such as good economic and institutional quality, economic and
territorial policies and productivity. However, in the case of unstable macroeconomic
conditions, encouraging competition may not be achieved (Safiullin, 2015).
In Fig. 1, from a regional perspective, the top 20 GCI 4.0 rankings are almost entirely
from Western Europe (10 economies), North America (2), and East Asia and the Pacific
(7) economies. In fact, East Asia and the Pacific have the highest median scores of all
regions (72.6), slightly higher than Europe and North America (70.8). On the other hand,
of the 34 sub-Saharan African economies studied, 17 are among the bottom 20 countries
in the world. The median of the region is 45.2, which is less than half of the border.
However, the gap between each region is profound. Finally, the breadth of GCI 4.0
and its 12 pillars reflects the degree and complexity of the competitiveness ecosystem.
The results show that the quality of the entire ecosystem is as good as the quality of its
weakest part, which represents a binding constraint: the lowest score of the 12 pillars
explains 88% of the change in the overall GCI 4.0 score. The top 10 economies have the

Fig. 1  Competitiveness gap within regions. Source: Global Competitiveness Report (2018)

13
Journal of the Knowledge Economy

lowest average score of 72.2 (product market score), while the top 10 economies with
the weakest competition have the highest average score of 54.4 (macroeconomic stability
score) (Table 1).
The differences in the performance of national and regional competitiveness need to
determine the determinants of competitiveness in order to improve competitiveness by
formulating relevant policies. In this context, the purpose of this study is to investigate
the key macroeconomic determinants of national innovation. According to the literature,
this research focuses on determining economic, social, and institutional factors, including
financial development, institutional quality, foreign direct investment, R&D, human
capital, and innovation determinants of trade openness (measured by the total number of
patent applications) in 15 panel data collection for emerging countries from 2008 to 2017.
Emerging economies are characterized by an increasingly important market orientation
and an expanding economy, where innovation and competitiveness play a key role in
economic development (Castro-Gonzales et al., 2017; Gugler, 2017). In addition, the level
of competitiveness of emerging countries is much lower than that of developed countries.
Several existing studies of economies with different levels of development believe
that innovation is the foundation of the economic growth process and is essential
for survival in today’s dynamic world (Cantwell, 2005; Carneiro, 2000; Şener &
Sarıdoğan, 2011; Ciocanel & Pavelescu, 2015; Ferreira et al., 2017; Hadj, 2020).
This is also a key factor that determines the economic growth of a country (Schwab,
2017; Solow, 1956). In this case, Dincer (2019) proves this; innovation brings
benefits to both developed and developing countries. Lee et al. (2016) believe that
innovation has a constructive role in ensuring economic progress and sustainable
development in developed countries. For developing economies, innovation is a key
tool to reach the development level of developed countries. In addition, innovation is
the foundation of the industrialization process (Schumpeter, 1939) because it has
the potential to expand the geographic scope of the market and increase economic
competitiveness (Hartono & Kusumawardhani, 2019; Krammer, 2009). In addition,

Table 1  regional performance, by pillar (average score: 0-100)

13
 Journal of the Knowledge Economy

innovation in one field will have a tricky effect on other fields such as healthcare,
agriculture, and education (Acemoglu et al., 2016).
Various macroeconomic variables are key factors affecting the development
of innovative activities in different countries (Malik, 2020). The stability of the
macroeconomic environment is important for business innovation, and therefore for
the overall competitiveness of a country (Pelagidis, 2010; Sinn, 2014). Instability and
low tax rates limit the government’s ability to cope with the business cycle, while
companies have no effect when inflation is high. Foreign direct investment is regarded
as a source of competitiveness due to its capital flow characteristics. Capital flows also
provide the transfer of technology and knowledge from home to the host country; as
a result, unless the macro environment is stable, the economy cannot innovate and
grow in a sustainable manner. Recently, scholars have become increasingly interested
in macroeconomic conditions and innovation (for example, see Khan & Roy, 2011;
Ayalew et al., 2019; Bekana, 2019; Karbowski, 2016; Malik, 2020). They provided
convincing evidence to support the view that macroeconomic conditions are the key
determinants of innovation. Therefore, since both macroeconomic conditions and
innovation are interrelated, we aim to demonstrate how macroeconomic conditions
affect innovation to affect the competitiveness of emerging countries, that is,
macroeconomic indicators are used as policy variables that can affect innovation
to improve competitiveness. As far as we know, this is the first study aimed at
demonstrating how the interaction between macroeconomic indicators and innovative
activities affects competitiveness, especially in emerging countries.
This research also addresses related gaps in the existing literature. First of all,
previous empirical studies only focused on a single variable (Cantwell, 2005;
Majerová & Nevima, 2015) and did not consider all these variables comprehensively.
As far as we know, no empirical studies have considered the combined effects of these
variables on competitiveness. Second, the existing literature mainly focuses on the
relationship of innovation competitiveness (Ferreira et al., 2017; Farinha et al., 2016;
Neamat & Yitmen, 2017; Rodríguez-Pose & Wilkie, 2017; Ciocanel & Pavelescu,
2015) or economic indicators of competitiveness (Siudek & Zawojska, 2014; Rusu
& Roman, 2018), but did not confirm how macroeconomic indicators affect the
innovative activities of the competitiveness activities of emerging countries.
In view of the above motivation, our research provides some theoretical and
empirical contributions to the ongoing literature. First, from a theoretical point of view,
this inquiry contributes to the previous literature by showing how competitiveness
is driven by innovation and the country’s institutional and economic conditions in
different ways. As a contribution, this study expands the previous competitiveness
literature by demonstrating how macroeconomic conditions affect innovation
activities, which in turn affect the competitiveness performance of countries. Secondly,
from an empirical point of view, the study also calculated and discussed the net
impact of the interaction between innovation and the six indicators of macroeconomic
conditions (financial development, institutional quality, and foreign direct investment)
on competitiveness. Contributed to the competitive literature. R&D, human capital,
and trade opening. Third, this study uses a two-step system generalized method of
moments (GMM) to effectively consider the endogenous problem. The structure of
the remaining articles is as follows. The second part briefly reviews the theoretical

13
Journal of the Knowledge Economy

framework and literature on determinants of competitiveness. The third part provides

the objectives, and the fourth part explains the basic principles of the research. The
fifth part discusses data and econometric methods. The sixth section describes the
findings and results. The seventh part continues to summarize and policy implications.

Theoretical Background

The concept of Competitiveness

In order to assess the competitiveness of a country, it is necessary to understand

the concept of competitiveness (Farinha et al., 2018). Porter (1990) defined
competitiveness from three different stages of economic development: (1) resource-
driven, (2) efficiency-driven, and (3) innovation-driven; two transitional stages
between these steps (Acs et al., 2008; Sölvell, 2015). Resource-driven countries
compete for cost efficiency when producing raw materials or products with low
added value (Acs et al., 2008). These economies are based on non-agricultural
independence (necessity entrepreneurship) (Amorós & Bosma, 2014). Second,
countries need to improve their productivity and skills to adapt to technological
developments that can take advantage of the economies of scale in large markets. At
this stage, the increase in foreign direct investment (FDI) coincides with the decline
in compulsory entrepreneurship (Acs et al., 2008; Schwab, 2013). Innovation-driven
economies need to expand the business environment to create entrepreneurship
based on information and communication technology. At this point, many small- and
medium-sized enterprises have emerged in the service industry. These small- and
medium-sized enterprises focus on innovative factors with strong growth potential
(Schwab, 2013; Amorós & Bosma, 2014; WEF, 2016). Schwab (2013) believes that
plans to improve national competitiveness must be adopted according to different
stages of development (see Table 2).
The Global Competitiveness Index report divides countries into three main
levels of development and two transitional levels. Two criteria are usually used
to determine the level of development of a country. The first criterion is GDP per
capita, which reflects the wages of each country. To measure these aspects, the
Global Competitiveness Index (GCI) uses statistics such as school enrollment
rate, government debt, budget deficit, and life expectancy. GCI also uses data from
WEF’s annual survey to document conceptual or qualitative assessments (Schwab,
2013; WEF, 2016). The second criterion for determining the level of development
is based on the country’s dependence on natural and mineral resources. This ratio
is calculated by measuring the proportion of mineral exports in the country’s total
exports. Therefore, countries that have exported more than 70% of their (natural)
minerals for five consecutive years belong to the group of countries with major
production factors (first stage of development or resource-based). In order to divide
the country into the second and third stages of development, other weighting factors
that are more important to the country’s competitiveness are gradually included
in the calculation. In addition, countries located between these three categories of
countries are considered transition countries.

13
 Journal of the Knowledge Economy

Table 2  Framework of the Global Competitiveness Index

Global Competitiveness Index

Basic requirements Efficiency enhancers Innovation and sophistication

factors
1. Institutions training 5. Higher education and training 11. Business sophistication
2. Infrastructures 6. Goods market efficiency 12. Innovation
3. Macroeconomic environment 7. Labor market efficiency
4. Health and primary education 8. Financial market development
9. Technological readiness
10. Market size
Stages of development
1—Factor-driven economies Transition 2—Efficiencydriven Transition 3—Innovation-driven
1–2 economies 2–3 economies

Source: Schwab (2013)

The calculation method of the GCI index is the weighted average of the
competitiveness components, divided into 12 pillars. These include institutions,
infrastructure, macroeconomic environment, primary health and education, higher
education, raw material market efficiency, labor market efficiency, financial market
development, technical readiness, market size, company complexity, and innovation.
When calculating GCI, each pillar of the country’s economic development stage has
relative weights, some of which are mainly composed of qualitative data. The best
way to improve competitiveness in a “resource-driven economy” is different from
an “efficiency-driven economy” or an “innovation-driven economy” (WEF, 2016).
According to this logic, GCI considers the different stages of development and
assigns high relative weights to the most important pillars in each stage (see Table 3).

Macroeconomic Environment and Competitiveness

The macroeconomic environment represents the overall state of the economy and
provides a framework for the operation of all entities. It defines how consumers
and companies make economic decisions. According to Fischer (1993), a stable
macroeconomic environment first depends on a predictable low inflation rate and a
sustainable and stable fiscal policy. Economic stability and predictability are especially
seen as driving forces for investment and productivity. Similarly, considering that it is
difficult for companies to make decisions or prosper when the country cannot control
macroeconomic indicators, the stability of the macroeconomic environment is very
important for business activities. The stability of the macroeconomic environment
is critical to a country’s business and overall competitiveness. When inflation is out
of control, companies cannot make wise decisions. If the government must repay its
past debts, it cannot provide services effectively. Competitiveness is considered to be
an important mechanism to promote economic development through employment,
innovation and welfare effects (Delgado et al., 2012). In the business and economics
literature, macroeconomic stability is an important driver of competitiveness. However,

13
Journal of the Knowledge Economy

Table 3  Weightings in the calculation of the WEF Global Competitiveness Index (GCI)
Dimensions Basic Transition Efficiency Transition Innovation and
require- (1–2) enhancers (2–3) sophistication
ments (stage 2) (stage 3)
(stage 1)

GDP per capita (U.S. $) < 2,000 2000– 3000– 9,000– > 17,000
2,999 8,999 17,000
Weight for basic requirements sub 60% 40–60% 40% 21–40% 20%
index
Weight for efficiency enhancers sub 35% 35––50% 50% 50% 50%
index
Weight for innovation and sophistica- 5% 5–10% 10% 10–30% 30%
tion factors

Source: Schwab (2013)

macroeconomic stability in itself is not the only driving force for competitiveness,
because there may be more complexity behind multidimensional phenomena such as
competitiveness. Not only the amount of investment in innovation, but also its quality
and success are one of the key factors to improve competitiveness.
The dynamics of competition may vary greatly depending on the macroeconomic
environment and the level of economic development. Countries differ greatly in
competitiveness (Liu, 2017). Although macroeconomic stability is not the only factor
that increases a country’s productivity, on the other hand, macroeconomic instability
will certainly damage the entire economy. Part of the reason is that companies cannot
make decisions when inflation is out of control, and governments will find it difficult
to provide services if they have to pay high fees (interest on past debt) (Porter &
Schwab, 2008). A government that generates high inflation is a government that has
lost all control. Therefore, under these conditions, economic growth is very low. The
instability of inflation will bring exchange rate risks to investors. Lack of control over
inflation will directly or indirectly affect domestic demand. This means shifting from
domestically produced goods to imported goods and affects the level of production,
which in turn will affect a country’s consumer demand and citizens’ income. High
levels of macroeconomic turbulence may also lead to political turmoil. This is
because the wages of many poor people do not match the high prices in the market,
and given the low output, there is a higher sense of job insecurity (Ulvedal, 2013).
Competitiveness is affected by many macroeconomic indicators and the business
environment. For example, achieving global openness through trade, investment, and
labor mobility is an important factor in improving competitiveness. The benefits of
combining trade and investment can be assessed in two ways (WEF, 2015). First, they
help create new economic opportunities by expanding the market size of domestic
companies. By making companies internationally competitive, they can also stimulate
productivity and innovation growth, which will have a significant positive impact
on the company’s innovation motivation and skills (Onodra, 2008). Fontagné and
Pajot (1997) emphasized the link between foreign direct investment, trade, and
competitiveness. Attracting foreign direct investment (FDI) by increasing capital inflows

13
 Journal of the Knowledge Economy

can bring more job opportunities, more financial business financing, as well as more
innovation, national industrial development and higher exports, thereby enhancing the
country’s competitiveness. The positive impact of foreign direct investment on national
competitiveness and entrepreneurship depends on the country’s level of development
(Meyer & Sinani, 2009; Kim & Li, 2014). Other studies (such as Ilzkovitz et al.,
2009; Taner et al., 2000) have also analyzed the relationship between international
trade and national competitiveness. As trade improves a country’s access to global
resources and broadens market access, a country’s business performance depends on
its competitiveness. In addition, countries with higher GDP are more open to trade;
countries with a higher share of foreign direct investment and GDP education have
also led to better economies (Fetahi-Vehapi et al., 2015; Pilinkiene, 2016). In addition,
business startup costs are a key determinant of competitiveness and economic well-
being, employment and living standards. High business costs make a country less
attractive to foreign direct investment and reduce the competitiveness of the company’s
goods and services. Research such as Laroussi (2009) shows that more labor market
regulations and business regulations bring more costs and competitiveness.

Innovation and Competitiveness

Nowadays, growth based on innovation is not just the ability and privilege of high-
income countries. Developing countries and emerging countries also tend to formulate
appropriate policies to improve their innovation capabilities. Innovation policies are
formulated in different forms according to the needs of the country; even at the same
level of development, their impacts are different. Innovation is a core aspect of the
process of creating an economy. It also helps foster knowledge, increase productivity, and
create employment opportunities. Investment in R&D helps to change the company’s
growth mode, enabling it to drive new products, new processes, and new organizational
methods, which have been shown to change the composition of the market (Fernandes
& Ferreira, 2013). Effective implementation of innovation has gradually been regarded
as synonymous with building sustainable competitive advantage and thus enhancing
the overall performance of the organization (Koc & Ceylan, 2007). In an increasingly
competitive environment, innovation is a crucial factor. Therefore, these companies
have proven to be able to occupy a dominant position and increase profitability (Hu &
Hsu, 2008; Kaminski et al., 2008). There is no doubt that the impact of innovation on
economic growth will actively enhance the competitiveness of countries in the current
knowledge-based economy (Kaynak et al., 2017).
In addition to the above, competitiveness and innovation performance represent two
interrelated economic categories, reflecting their synergies in different areas of economic
and social life (Ivanová & Kordoš, 2017). Through innovation, products and services are
competitive not only domestically but also in the global economy. Today, innovation and
technology investment have become a prerequisite for competitiveness and sustainable
economic development. Pece et al. (2015) used multiple regression models from central
and eastern countries and found a positive correlation between economic growth and
innovation. Increased investment in research and the introduction of new products have
improved people’s living conditions and led to the development of the public and private

13
Journal of the Knowledge Economy

sectors. Dima et al. (2018) used Pearson coefficient and panel data regression model to
study the impact of the knowledge economy on the competitiveness of EU countries.
Research results show that innovation and education are the main determinants of
EU economic convergence. Similarly, Ciocanel and Pavalescu (2015) conducted an
empirical study on the relationship between innovation and competitiveness in the
European Union and concluded that focusing on research and innovation activities can
greatly promote EU competitiveness and economic sustainability.
Regarding empirical research, in recent years, the literature has focused on the
role of innovation as a tool to improve global competitiveness. Streimikiene (2014)
pointed out that research and development are one of the main driving forces for
economic growth and the creation of a modern knowledge economy, which can
ensure the effective use of natural resources and reduce the negative impact on the
environment. Iosif (2014) analyzed the relationship and intensity between innovation
and national competitiveness in EU countries through econometric analysis. She
focused on comparing the dimensions of the Innovation Alliance Scoreboard (IUS)
and the corresponding indicators related to GCI indicators and assessed the impact
of innovation determinants on the country’s international competitiveness. According
to the Sofrankova (2017) report, economies with higher levels of higher education,
training, and innovation activities tend to have higher GCI indicators compared with
countries with lower levels of education and innovation performance.
In addition, some studies have investigated the differences in innovation performance
and competitiveness between countries. Şener and Sarıdoğan (2011) tried to study the
impact of technological innovation-oriented global competitiveness strategies and
transmission mechanisms on the economic growth of high-income OECD countries.
Their result is that those countries that have economic policies and strategies based on
scientific and technological innovation not only have huge advantages and sustainable
competitive advantages in terms of global competitiveness but also economic growth
and development that lead to national wealth and welfare. Cvetanovic et al. (2014)
studied the relationship between the global innovation index and global competitiveness
index in the Western Balkan countries and six selected EU countries. Based on
correlation and cluster analysis, they found that the Global Innovation Index (GII) has
no statistically significant impact (linear correlation) on the Global Competitiveness
Index (GCI) of Western Balkan countries. On the other hand, they proved the statistical
significance of GII to GCI. Carayannis and Grigoroudis (2014) used multi-objective
mathematical planning and trend and gap analysis and found no significant gaps
between innovation, productivity, and competitiveness, although some differences may
be found in specific countries. Hudec and Prochádzková (2015) conducted a study on
innovation performance and efficiency in Visegrad countries and regions.

Innovation and Macroeconomic Indicators

Schumpeter (1939) used the term innovation to attract people’s attention. He believed
that innovation would lead to “creative destruction” and increase productivity. In the
field of innovation, the most widely considered modern theories are the Endogenous
Growth Theory (Romer, 1990), Porter’s Theory of Competitive Advantage, the National

13
 Journal of the Knowledge Economy

Innovation System Theory (Lundvall, 1992; Nelson, 1993), and the National Innovation
Capability (NIC) framework (Furman et al., 2002). These studies investigated the link
between innovation and economic performance, which can be traced back to Schum-
peter’s growth model (Schumpeter, 1934). In the recent literature, new research on the
link between research innovation and macroeconomic factors has emerged (Galindo
& Mendez, 2014). In addition, some researchers emphasize the importance of innova-
tion as one of the main driving forces of economic development (Bae & Yoo, 2015).
As stated in Maradana et al. (2017), economic growth can also simulate the level of
innovation in the development process, which can lead to a conclusion that there is a
two-way causal relationship between innovation and economic growth (Pradhan et al.,
2016). Among macroeconomic factors, Tomaszewski and Świadek (2017) emphasized
that income dynamics are one of the main drivers of innovative growth.
However, recent empirical studies indicate that several studies have identified
the determinants of innovation. For example, Malarvizhi et al. (2019) pointed out
that a strong financial system can ensure sufficient funds for companies to carry
out innovative activities. Countries with more funding sources show higher levels
of innovation (Meierrieks, 2014). Few studies have tried to determine the type of
relationship between financial development and innovation and found that there is a
U-shaped relationship between the two, which means that financial investment will
accelerate investment, but will only reach a threshold level (Law et al., 2018). In
addition, Bloom et al. (2016) pointed out that trade openness and cross-border trade
flows are linked to leading innovations in many ways. In turn, this has prompted
exporters to upgrade their resources and quickly innovate in order to compete with
domestic and international companies. The “New Growth Theory” also proposes
that trade opening is conducive to the spillover of information and communication
technologies and promotes innovation (Lee et al., 2016). In addition, Krammer (2009);
believes that R&D spending has a positive impact on the country’s innovation output.
They believe that government R&D financing has spillover effects. This incentivizes
the government to further invest in R&D activities and programs dedicated to the
creation of innovative products and technologies (Engelbrekt et al., 2018). In addition,
the education level of a country’s people is a measure of human capital and another
factor that is crucial to the process of innovation, creation, and dissemination.
Human capital is considered an important driving force for innovation and economic
development. However, as Diebolt and Hippe (2019) stated, the long-term impact
of human capital on innovation and economic development is a black box. Skilled
labor creates effective production methods and innovative products (Krammer, 2009).
Education is also crucial to shaping a country’s ability to absorb the latest technology
and thereby increase innovation output (Rodríguez-Pose & Wilkie, 2019). Finally, on
the one hand, foreign direct investment encourages local producers to increase R&D
and leads to more knowledge flow, which leads to innovation (Fu & Yang, 2009). On
the other hand, foreign direct investment may lead to the flow of skilled and technical
talents abroad and may crowd out small businesses and reduce local innovation (Law
et al., 2018). Considering the above arguments, we propose the following hypothesis:
Hypothesis 1: Macroeconomic stability fosters innovative activities, which, in
turn, increases competitiveness.

13
Journal of the Knowledge Economy

Data and Research Design

Data Description and Variable Selection

Using an unbalanced group composed of 16 emerging economies, combined with

data from the World Economic Forum (WEF), World Development Indicators (WDI),
and World World Intellectual Property Organization (WIPO) during 2007–2018,
various macroeconomics studied how indicators can be used to enhance innovation
and thereby increase overall competitiveness. The periodicity adopted is based on
data availability constraints, and the scope of emerging economies conforms to the
research motivation. We chose the countries according to the availability of data for
the variables considered in the analysis.1 In Table 4, we describe the dependent and
independent variables used in this study, including their definition and sources.
Starting from those stated above, the main hypothesis is that the macroeconomic
factors with a potential impact over a country’s competitiveness are different
according to the stage of economic development of that country (Tables 5 and 6).

Research Design

Model Specifications

Taking into account the above assumption, the purpose of this study is to explore how
the macroeconomic factors of 16 selected emerging economies using the sys-GMM
method during the period 2007–2018 can promote innovative activities to improve
competitiveness. Therefore, we consider the following specifications to analyze
the impact of various macroeconomic indicators, terms of innovation activities and
their mutual influence, and other control variables on competitiveness. Therefore, the
designation and notation of the proposed model are written as follows:
k
∑
GCIit = 𝛽0 + 𝛽1 INNit + 𝛽2 MACit + 𝛽3 INNit × MACit + 𝜆j Mjit + 𝜈t + 𝜀it (1)
j=1

where GCIit represents the competitiveness of countries; I (i = 1, …,N = 16), t (T = 1, …,

N = 12), and 𝛽0 are the ith country, tth time period, and the constant parameter that varies
across countries but not overtime, respectively; MAC is the macroeconomic indicators;
INN is innovation (patent applications per capita); MAC*INN is the interaction between
macroeconomic indicators and innovation; M′ is the other regressors incorporated in
the model as a vector of control variables (lagged dependent variable, GDP growth, and
business startup costs); j is the number of included control variables; 𝜈t is the country-
specific effect; and 𝜀it is the error term. The coefficient of innovation is expected to be
positive. The coefficients of macroeconomic indicators are expected to be positive. Then,
the interaction effect is measured by the coefficient 𝛽3, and the developmental argument
suggests that the sign of this coefficient is expected to be positive.
1
Argentina, Brazil, Chile, Colombia, Ecuador, Hungary, Indonesia, Iran, Malaysia, Peru, Poland, Romania,
South Africa, Thailand, Turkey, Uruguay.

13
 Journal of the Knowledge Economy

Table 4  The variables of the model, their measurement, and source

Variable Measurement Source

Economic competitive- The Global Competitiveness Index which takes World Economic Forum
ness of countries scores from 1 to 7 (a higher average score means
(GCI) a higher degree of competitiveness) and is calcu-
lated as a weighted average of several components
of competitiveness that are grouped into 12 pillars
Innovation (INN) Total number of patent applications per capita WIPO—World Intel-
lectual Property
Organization
Financial Development Total domestic credit given to the private sector (% World Bank Database
(FIND) of GDP)
Education (EDU) Government expenditure on secondary school (% World Bank Database
of GDP)
Research Expenditure Total R&D expenditure (% of GDP)
(R&D)
Foreign direct invest- Net inflows (new investment inflows less disinvest- World Bank Database
ments inflows (FDI) ment) in the reporting economy from foreign
investors and is divided by GDP
Trade Openness (TR) The sum of exports and imports of goods and World Bank Database
services measured as a share of gross domestic
product
Business start-up costs The costs supported when starting a new business World Bank Database
(COST) measured as percentage of GNI per capita
GDP growth (GDP) Annual percentage growth rate of GDP at market World Bank Database
prices based on constant local currency

Method of Analysis

The estimation method used in this study is System GMM (sysGMM). There are
four reasons that prompted us to adopt the GMM method. The first one contains
the conditions for using the sys-GMM method, while the latter three show its
advantages. First, the number of countries (N = 16) is higher than the number of
years (T = 12), which in turn leads to the control of dynamic panel bias (Baltagi,
2005; Bond, 2002; Roodman, 2009). Therefore, the N > T condition of the GMM
method is satisfied. Second, compared with the differential GMM (DGMM) method,

Table 5  Descriptive statistics Variable Obs Mean Std. Dev Min Max

GCI 140 4.28 0.352 3.481 5.225

FIND 140 63.346 41.048 12.314 150.974
TR 140 69.51 41.853 22.106 168.49
EDU 140 16.551 4.657 4.266 23.314
R&D 140 0.628 0.378 0.055 1.437
GDP 140 9.095 0.382 8.178 9.671
INN 140 0.111 0.066 0.01 0.288

13
Journal of the Knowledge Economy

Table 6   Matrix of correlations Variables (1) (2) (3) (4) (5) (6) (7)

(1) GCI 1
(2) FIND 0.68 1
(3) TR 0.56 0.412 1
(4) EDU 0.286 0.287 0.304 1
(5)R&D 0.363 0.285 0.458 0.625 1
(6) GDP 0.201 − 0.019 0.194 0.583 0.55 1
(7) INN 0.479 0.474 0.157 0.395 0.344 0.374 1

sys-GMM generates more effective estimates by reducing the finite sample bias.
Third, because this method is consistent with the panel data structure, cross-country
differences are not excluded in the regression analysis. Fourth, the estimation
method also solves the problem of reserve causality and endogeneity in all regression
variables. In our estimation, we may have the possibility of endogeneity, which
is the result of the causal relationship between the variables under consideration.
In addition, missing variable deviations may be another cause of endogeneity.
Therefore, it is recommended to use S-GMM to solve this problem and ensure the
reliability of our estimates. In order to solve the problem of endogeneity, Eq. (1) is
adopted. The standard sys-GMM estimation procedure is specified in level (2) and
difference (3) by the following models:
k
∑
GCIit = 𝛽0 + 𝛽1 GCIit−1 + 𝛽 2 INNit + 𝛽3 MACit + 𝛽4 INNit × MACit + 𝛿j Mjit + 𝜈t + 𝜀it
j=1
(2)
( )
GCIit − GCIit−1 =𝛽1 (GCIit−1 − GCIit−2 ) + 𝛽 2 INNit − INNit−1
( ) ( )
+ 𝛽3 MACit − MACit−1 + 𝛽4 INNit × MACit − INNit−1 × MACit−1
∑k
+ 𝜆j (Mjit − Mjit−1 ) + (𝜈t − 𝜈t−1 ) + (𝜀it − 𝜀it−1 )
j=1
(3)
where GCIit−1 entails the lagged value of the dependent variable (competitiveness)
for country i over period t. In dynamic panel data, the introduction of the lagged
dependent variable GCIit as an independent variable GCIit−1 violates the orthogonality
assumption, which is due to the fact that the lagged dependent variable is correlated
with the error term. Therefore, a two-step S-GMM method is preferred to the one-
step SGMM approach because it addresses concerns of heteroscedasticity, whereas
the latter is consistent with homoscedasticity. However, the two-step S-GMM variant
presents estimates of the standard errors tend to be severely downward biased in small
samples. To deal with this problem, xtabond2 command in STATA (Roodman, 2009)
makes available a finite-sample correction to the two-step covariance matrix developed
by Windmeijer (2005), which can make two-step robust estimations more efficient than
one-step robust ones, especially for SGMM. Accordingly, the command xtabond2 is
adopted in this study to run the two-step S-GMM estimations in STATA 13.

13
 Journal of the Knowledge Economy

Empirical Analysis

Table 7 below provides the sys-GMM results (models 1–5) related to the empirical
correlation between competitiveness, innovation, and macroeconomic factors. For each
regression, four types of information criteria are used to evaluate these estimated models.
Four main results can be observed from Table 3. First, in all models (1–5), as
expected, innovation has a positive impact on competitiveness, ranging from 0.025
to 0.054%. Ivanová and Kordoš (2017) also support the contribution of innovation in
the case of the Slovak Republic. The study shows that innovation performance is one
of the factors affecting the development of various fields of social life. Economic
performance and competitiveness at all levels. Therefore, Ivanová and Čepel (2018)

Table 7  GMM results of model estimation

Model 1 Model 2 Model 3 Model 4 Model 5
Variables β (Std. β (Std. Β (Std. Β (Std. Β (Std. Error)
Error) Error) Error) Error)

GCI (− 1) 0.033*** 0.051*** 0.054*** 0.031*** 0.025***

(0.015) (0.09) (0.012) (0.011) (0.011)
Innovation (INN) 0.027** 0.021*** 0.038*** 0.062*** 0.039***
(0.013) (0.007) (0.007) (0.013) (0.009)
Financial development (FD) 0.201** -
- - -
(0.095)
Trade openness (TO) - 0.683*** - - -
(0.127)
Education (EDU) - - 0.753*** - -
(0.124)
Research & Development (RD) - - - 0.139*** -
(0.0208)
Foreign Direct Investment - - - - 0.143***
(FDI) (0.058)
FIND*INN 0.037** -
- - -
(0.017)
TO*INN - 0.061*** --
- -
(0.014)
EDU*INN - - 0.024*** - -
(0.007)
RD*INN - - - 0.049*** -
(0.014)
-
FDI*INN - - - 0.035***
(0.008)
Net effects 0.043 0.096 0.121 0.077 0.054
GDP per capita 0.042*** 0.056** 0.071*** 0.049*** 0.052**
(0.011) (0.021) (0.012) (0.014) (0.019)
Startup Costs − 0.046*** − 0.041*** − 0.041*** − 0.049*** − 0.052***
(0.013) (0.014) (0.014) (0.012) (0.013)

Standard errors are in parentheses

*
p < 0.1; **p < 0.05; ***p < 0.01

13
Journal of the Knowledge Economy

proved that the key factor for states to improve competitiveness is the innovation
performance of enterprises, which is projected into the innovation performance of
the entire economy through innovative business processes. Therefore, innovation
performance is crucial to the foundation of an economy’s strong, competitive, and
resource-efficient foundation in the world market (Kaynak et al., 2017).
Second, the coefficients of macroeconomic indicators indicate that, as expected,
the increase in these indicators will lead to an increase in competitiveness, ranging
from 0.139 to 0.753%. Rusu and Roman (2018) found the same result. He proved
that in Central and Eastern European countries, innovation and improvement, FDI
increase, trade openness, and GDP growth all encourage competitiveness. However,
a stable macroeconomic framework will increase capital accumulation and
competitiveness. Third, we focus on an important gap in existing research, namely
understanding how macroeconomic indicators promote innovative activities to
improve competitiveness. Therefore, the net effect is calculated to assess the overall
impact of this interaction. For example, in the first column of Table 3 (model 1),
the net effect of the interaction between financial development and innovation is
0.049 [(0.201 × 0.111) + (0.027)]. In this formula, the average value of innovation
is 0.111, the marginal impact of an increase in macroeconomic conditions (financial
development) is 0.201, and the unconditional impact of innovation is 0.027. For
each estimated model, a positive net effect indicates that the hypothesis tested
has been verified. Table 3 shows that the net impact of all estimated models on
competitiveness is positive. This result means that the stability of macroeconomic
conditions will enhance innovation activities, thereby enhancing the competitiveness
of emerging economies. This result is consistent with Kirikkaleli and Ozun
(2019), Tsuji et al. (2018), who found that macroeconomic stability is necessary
to accelerate innovation activities, which in turn can improve competitiveness.
Compared with the impact of macroeconomic stability, the impact of innovation
growth on competitiveness may even be controversial. In a period of unstable
finance and macroeconomics, investment in innovation can create long-term
opportunities for long-term freedom from international competitiveness. Fourth,
most important control variables have been signed in accordance with detailed
instructions and expectations. It is found that per capita GDP has a positive and
statistically significant impact on competitiveness, while the impact of startup costs
is negative, as expected.

Conclusion and Further Research Directions

The purpose of this article is to evaluate how the macroeconomic conditions of

emerging economies can improve their competitiveness through the development
of innovative activities. Therefore, we used the sys-GMM method and 16 emerging
economies from 2007 to 2018. According to the definition of the World Economic
Forum (WEF), competitiveness is defined as “a set of institutions, policies and factors
that determine the level. The productivity of a country”, and innovation is defined as
the total number of patent applications per capita. In order to analyze the policy role
played by macroeconomic conditions, we considered five macroeconomic indicators:

13
 Journal of the Knowledge Economy

financial development, trade openness, government spending on secondary

education (percentage of GDP), R&D spending, and foreign direct investment.
Before discussing the theoretical and empirical contributions of this research and its
policy implications, it is necessary to summarize the main findings. First, innovative
activities have an unconditional positive impact on competitiveness. Second, the
conditional effect of macroeconomic conditions improves competitiveness. Third,
the net impact on competitiveness related to the interaction between innovation and
macroeconomic indicators is positive, indicating that macroeconomic indicators can
be used to enhance the positive impact of innovation on competitiveness.
As a theoretical contribution, this study extends previous studies on competitiveness
(e.g., Flachenecker, 2018; Camagni & Capello, 2010; Rusu & Roman, 2018), by
demonstrating how macroeconomic indicators foster innovation, which, in turn, boost
competitiveness performance. From an empirical viewpoint, this inquiry also contributes
to the prior competitiveness literature by the computation and discussion of the net
effects on competitiveness from the interactions of innovation with five indicators of
macroeconomic stability, namely, financial development, trade openness, government
expenditure on secondary education (% of GDP), research & development expenditure,
and foreign direct investment. More specifically, we used macroeconomic indicators as a
conditional variable that enhances innovative activities to influence competitiveness, i.e.,
macroeconomic conditions can modulate the effect of innovation on competitiveness in
emerging economies. This paper also extends previous studies in this area by focusing on
emerging economies. As mentioned above, we believe that emerging economies provide
an important framework for studying this interaction, because emerging economies as
transition economies are very similar in terms of economic development, but their position
in the global competitiveness rankings is different due to innovation performance and
macroeconomic conditions. In addition to these arguments and contributions, this article
also provides some enlightenment for policymakers and practitioners who aim to improve
the competitiveness of emerging economies, and provides future research directions.
Our findings indicate that macroeconomic conditions are an important condition for
enhancing innovation activities, and innovation activities in turn increase competitiveness.
For governments in emerging economies, it seems essential to enhance macroeconomic
stability through clear property ownership, effective economic supervision, solid laws,
reduction of bureaucratic barriers, and good policies to improve competitiveness. For
policy makers, our research also shows that it is important to consider the macroeconomic
environment in order to improve the country’s competitiveness. In addition, the
improvement of macroeconomic conditions can increase innovation activities.
In addition to the contributions and implications provided above, we also note that
our results and analysis are subject to some restrictions. First, emerging countries are
unique economies undergoing unique processes. The above findings are specific to
these countries. Therefore, the survey results in this period cannot be extended to
other economies, nor can it be extended to the same group of economies in different
periods. Second, since this research only focuses on 16 economies, and we know that the
impact of macroeconomic conditions should largely depend on the government’s policy
orientation, future research may try to address this issue for specific countries/regions,
or even more targeted policy implications. Third, the scope of this article is limited to
macro analysis, and future research should analyze competitive factors at the micro level.

13
Journal of the Knowledge Economy

References
Acemoglu, D., Akcigit, U., & Kerr, W. R. (2016). Innovation network. Proceedings of the National
Academy of Sciences, 113(41), 11483–11488.
Acs, Z. J., Desai, S., & Hessels, J. (2008). ‘Entrepreneurship, economic development and institutions.
Small business economics’, 31(3), 219–234.
Amorós, J. E., & Bosma, N. (2014). Global entrepreneurship monitor 2013 global report. Recovered on
February, 28, 2014.
Ayalew, M. M., Xianzhi, Z., Dinberu, Y. D., & Hailu, D. H. (2019). The Determinants of Firm’s
Innovation in Africa. Journal of Industry, Competition and Trade, 1–41.
Bae, S. H., & Yoo, K. (2015). Economic modeling of innovation in the creative industries and its
implications. Technological forecasting and social change, 96, 101–110.
Baltagi, B. H. (2005). Econometric analysis of panel data 3e. West Sussex: Wiley
Bekana, D. M. (2019). Political institutions, human capital and innovation: evidence from sub-Saharan
Africa. Democratization, 26(4), 666–708.
Bloom, N., Draca, M., & Van Reenen, J. (2016). Trade induced technical change? The impact of Chinese
imports on innovation, IT and productivity. The Review of Economic Studies, 83(1), 87–117.
Bond, S. R. (2002). Dynamic panel data models: a guide to micro data methods and practice. Portuguese
Economic Journal, 1(2), 141–162.
Bruton, G. D., Ahlstrom, D., & Obloj, K. (2008). Entrepreneurship in emerging economies: Where are
we today and where should the research go in thefuture. Entrepreneurship Theory and Practice,
32(1), 1–14.
Camagni, R., & Capello, R. (2010). Macroeconomic and territorial policies for regional competitiveness:
an EU perspective. Regional Science Policy & Practice, 2(1), 1–19.
Cantwell, J. (2005). Innovation and competitiveness. The Oxford handbook of innovation, 543–567.
Carayannis, E., & Grigoroudis, E. (2014). Linking innovation, productivity, and competitiveness:
implications for policy and practice. The Journal of Technology Transfer, 39(2), 199–218.
Carneiro, A. (2000). How does knowledge management influence innovation and competitiveness? Journal
of knowledge management.
Castro-Gonzales, S. J., Espina, M. I., & Tinoco-Egas, R. M. (2017). Strategies and competitiveness for
emerging countries. International Journal of Emerging Markets, 12(1), 125–139.
Ciocanel, A. B., & Pavelescu, F. M. (2015). Innovation and competitiveness in European context.
Procedia Economics and Finance, 32(15), 728–737.
Cvetanovic, S., Despotović, D., Mladenović, I., & Jovović, D. (2014). The analysis of innovation in
Western Balkan countries in 2012. Economic research-Ekonomskaistraživanja, 27(1), 830–846.
Delgado, M., Ketels, C., Porter, M. E., & Stern, S. (2012). The determinants of national
competitiveness (No. w18249). National Bureau of Economic Research.
Diebolt, C., & Hippe, R. (2019). The long-run impact of human capital on innovation and economic
development in the regions of Europe. Applied Economics, 51(5), 542–563.
Dima, A. M., Begu, L., Vasilescu, M. D., & Maassen, M. A. (2018). The relationship between the
knowledge economy and global competitiveness in the European Union. Sustainability, 10(6), 1706.
Dincer, O. (2019). Does corruption slow down innovation? Evidence from a cointegrated panel of US
states. European Journal of Political Economy, 56, 1–10.
Engelbrekt, A., Michalski, A., Nilsson, N., & Oxelhei, L. (2018). The European Union: Facing the
Challenge of Multiple Security Threats.
Farinha, L., Ferreira, J., & Gouveia, B. (2016). Networks of innovation and competitiveness: a triple helix
case study. Journal of the Knowledge Economy, 7(1), 259–275.
Farinha, L., Ferreira, J. J., & Nunes, S. (2018). Linking innovation and entrepreneurship to economic
growth. Competitiveness Review: An International Business Journal incorporating Journal of Global
Competitiveness, 28(4), 451–475.
Fernandes, C. I., Ferreira, J. J., & Raposo, M. L. (2013). Drivers to firm innovation and their effects
on performance: an international comparison. International Entrepreneurship and Management
Journal, 9(4), 557–580.
Ferreira, J. J., Fernandes, C. I., & Ratten, V. (2017). Entrepreneurship, innovation and competitiveness:
what is the connection? International Journal of Business and Globalisation, 18(1), 73–95.

13
 Journal of the Knowledge Economy

Fetahi-Vehapi, M., Sadiku, L., & Petkovski, M. (2015). Empirical analysis of the effects of trade openness
on economic growth: An evidence for South East European countries. Procedia Economics and
Finance, 19, 17–26.
Fischer, S. (1993). The role of macroeconomic factors in growth. Journal of Monetary Economics, 32(3),
485–512.
Flachenecker, F. (2018). The causal impact of material productivity on macroeconomic competitiveness
in the European Union. Environmental Economics and Policy Studies, 20(1), 17–46.
Fontagné, L., & Pajot, M. (1997). How foreign direct investment affects international trade and
competitiveness: An empirical assessment. CEPII WorkingPaper No. 17.
Fu, X., & Yang, Q. G. (2009). Exploring the cross-country gap in patenting: A stochastic frontier
approach. Research Policy, 38(7), 1203–1213.
Furman, J. L., Porter, M. E., & Stern, S. (2002). The determinants of national innovative capacity.
Research Policy, 31(6), 899–933.
Gallo, P., & Tomčíková, Ľ. (2019). The analytical view of the methods of strategy creation and
involvement of managers of individual control levels in the production of strategies in strategic
management in manufacturing companies in the conditions of the Slovak Republic. Calitatea,
20(170), 3–8.
Galindo, M. Á., & Méndez, M. T. (2014). Entrepreneurship, economic growth, and innovation: Are
feedback effects at work? Journal of Business Research, 67(5), 825–829.
GEM Global Report. 2015/16. London business School
Gugler, P. (2017). Emerging countries’ country-specific advantages (CSAs) and competitiveness of
emerging market multinational enterprises (EMNEs). Competitiveness Review: An International
Business Journal.
Hadj, T. B. (2020). Effects of corporate social responsibility towards stakeholders and environmental
management on responsible innovation and competitiveness. Journal of Cleaner Production,
250, 119490.
Hartono, A., & Kusumawardhani, R. (2019). Innovation barriers and their impact on innovation:
Evidence from Indonesian manufacturing firms. Global Business Review, 20(5), 1196–1213.
Hu, J. L., & Hsu, Y. H. (2008). The more interactive, the more innovative? A case study of South
Korean cellular phone manufacturers. Technovation, 28(1–2), 75–87.
Hudec, O. (2015). Visegrad countries and regions: Innovation performance and efficiency. Quality
Innovation Prosperity, 19(2), 55–72.
Huggins, R., Izushi, H., Prokop, D., & Thompson, P. (2014). Regional competitiveness, economic
growth and stages of development. ZbornikradovaEkonomskogfakulteta u Rijeci: časopiszaekon
omskuteorijuipraksu, 32(2), 255–283.
Ilzkovitz, F., Dierx, A., Galgau, O., & Leib, K. (2009, May). Trade performance and structural
competitiveness developments in the Euro Area: are member states equipped to meet the
globalisation challenges of the 21st century. In Workshop: The Implications of European
Integration, held by the Federal Reserve Bank of St. Louis and the European Union Studies
Association.
Iosif, A. E. (2014). Assessing the impact of innovation on national competitiveness in the European
Union. In Proceedings of The 24th Annual RESER Conference-Services and new societal
challenges: innovation and sustainable growth and welfare (pp. 633-640).
Ivanová, E., & Čepel, M. (2018). The impact of innovation performance on the competitiveness of the
Visegrad 4 countries. Journal of Competitiveness, 10(1), 54.
Ivanová, E., & Kordoš, M. (2017). Competitiveness and innovation performance of regions in Slovak
Republic. Marketing and Management of Innovations, 8(1), 145–158.
Kaminski, P. C., de Oliveira, A. C., & Lopes, T. M. (2008). Knowledge transfer in product
development processes: a case study in small and medium enterprises (SMEs) of the metal-
mechanic sector from Sao Paulo. Brazil. Technovation, 28(1–2), 29–36.
Karbowski, A. (2016). The elasticity-based approach to enterprise innovation. International Journal
of Management and Economics, 49(1), 58–78.
Kaynak, S., Altuntas, S., & Dereli, T. (2017). Comparing the innovation performance of EU candidate
countries: an entropy-based TOPSIS approach. Economic research-Ekonomskaistraživanja,
30(1), 31–54.
Khan, A. M., & Roy, P. A. (2011). Globalization and the determinants of innovation in BRICS versus
OECD economies: A macroeconomic study. Journal of Emerging Knowledge in Emerging
Markets, 3, 28–45.

13
Journal of the Knowledge Economy

Kim, P. H., & Li, M. (2014). Injecting demand through spillovers: Foreign direct investment, domestic
socio-political conditions, and host-country entrepreneurial activity. Journal of Business
Venturing, 29(2), 210–231.
Kirikkaleli, D., & Ozun, A. (2019). Innovation capacity, business sophistication and macroeconomic
stability: Empirical evidence from OECD countries. Journal of Business Economics and
Management, 20(2), 351–367.
Koc, T., & Ceylan, C. (2007). Factors impacting the innovative capacity in large-scale companies.
Technovation, 27(3), 105–114.
Korez-Vide, R., & Tominc, P. (2016). Competitiveness, entrepreneurship and economic growth.
In Competitiveness of CEE Economies and Businesses (pp. 25–44). Springer, Cham.
Krammer, S. M. (2009). Drivers of national innovation in transition: Evidence from a panel of Eastern
European countries. Research Policy, 38(5), 845–860.
Laroussi, H. (2009). Public Policy and Good Governance in Tunisia. Mondes en developpement, 1,
93–108.
Law, S. H., Lee, W. C., & Singh, N. (2018). Revisiting the finance-innovation nexus: Evidence from a
non-linear approach. Journal of Innovation & Knowledge, 3(3), 143–153.
Lee, S., Nam, Y., Lee, S., & Son, H. (2016). Determinants of ICT innovations: A cross-country
empirical study. Technological Forecasting and Social Change, 110, 71–77.
Liu, C. (2017). International competitiveness and the fourth industrial revolution. Entrepreneurial
Business and Economics Review, 5(4), 111–133.
Lundvall, B. Å. (1992). User-Producer Relationships, National Systems of Innovation and
Internationalisation. In National Systems of Innovation: Towards a Theory of Innovation and
Interactive Learning (pp. 45-67). Pinter Publishers.
Majerová, I., & Nevima, J. (2015). Macroeconomic determinants of competitiveness in the countries of
Visegrad Group plus. In Recent Advances in Environmental and Earth Sciences and Economics.
Proceedings of the 2015 International Conference on Energy, Environment, Development and
Economics (EEDE 2015). Greece: INASE (pp. 296–302).
Malarvizhi, C. A. N., Zeynali, Y., Mamun, A. A., & Ahmad, G. B. (2019). Financial development and
economic growth in ASEAN-5 countries. Global Business Review, 20(1), 57–71.
Malik, S. (2020). Macroeconomic Determinants of Innovation: Evidence from Asian Countries. Global
Business Review, 0972150919885494.
Maradana, R. P., Pradhan, R. P., Dash, S., Gaurav, K., Jayakumar, M., & Chatterjee, D. (2017). Does
innovation promote economic growth? Evidence from European countries. Journal of Innovation
and Entrepreneurship, 6(1), 1.
Meierrieks, D. (2014). Financial development and innovation: Is there evidence of a Schumpeterian
finance-innovation nexus? Annals of Economics & Finance, 15(2).
Meyer, K. E., & Sinani, E. (2009). When and where does foreign direct investment generate positive
spillovers? A meta-analysis. Journal of InternationalBusiness Studies, 40(7), 1075–1094.
Neamat, S., & Yitmen, I. (2017). Factors affecting the innovation and competitiveness in Kurdistan
Region of Iraq Construction Industry. International Journal of Advanced Engineering Research and
Science, 4(2), 237057.
Nelson, R. R. (Ed.). (1993). National innovation systems: a comparative analysis. Oxford University
Press on Demand.
Onodera, O. (2008). Trade and innovation: a synthesis. OECD Journal: General papers, 2008(4), 7-63.
Pece, A. M., Simona, O. E. O., & Salisteanu, F. (2015). Innovation and economic growth: An empirical
analysis for CEE countries. Procedia Economics and Finance, 26, 461–467.
Pelagidis, T. (2010). The Greek paradox of falling competitiveness and weak institutions in a high GDP
growth rate context (1995–2008).
Pilinkiene, V. (2016). Trade openness, economic growth and competitiveness. The case of the central and
eastern European countries. Engineering Economics, 27(2), 185-194.
Porter, M. & Schwab, K. (2008). The Global Competitiveness Report, Geneva, Switzerland: World
Economic Forum. Researches into understanding the determinants of competitiveness is a few
(Fernández & Pablo-Marti, 2016).
Porter, M. E. (1990). The Competitive Advantage of Nations.–New York: A Divizion of Macmillan
Publishing Co.
Pradhan, R. P., Arvin, M. B., Hall, J. H., & Nair, M. (2016). Innovation, financial development and
economic growth in Eurozone countries. Applied Economics Letters, 23(16), 1141–1144.

13
 Journal of the Knowledge Economy

Rodríguez-Pose, A., & Wilkie, C. (2017). Innovation and competitiveness in the periphery of Europe. In
Handbook of Regions and Competitiveness: Edward Elgar Publishing.
Rodríguez-Pose, A., & Wilkie, C. (2019). Innovating in less developed regions: What drives patenting in
the lagging regions of Europe and North America. Growth and Change, 50(1), 4–37.
Romer, P. M. (1990). Endogenous technological change. Journal of Political Economy, 98(5, Part 2),
S71-S102.
Roodman, D. (2009). How to do xtabond2: An introduction to difference and system GMM in Stata. The
Stata Journal, 9(1), 86–136.
Rusu, V. D., & Roman, A. (2018). An empirical analysis of factors affecting competitiveness of CEE
countries. Economic research-Ekonomskaistraživanja, 31(1), 2044–2059.
Safiullin, M. R., Elshin, L. A., & Prygunova, M. I. (2015). Methodological approaches to assess
the stability and global competitiveness of the regions under the macroeconomic instability
conditions. Mediterranean Journal of Social Sciences, 6(3 S2), 524–524.
Schumpeter, J. A. (1934). Change and the entrepreneur. Essays of JA Schumpeter: Routledge.
Schumpeter, J. A. (1939). Business cycles (Vol. 1, pp. 161-174). New York: McGraw-Hill.
Schwab, K. (2013). The Global Competitiveness Report 2013–2014 (p. 553). In Full Data Edition World
Economic Forum, Geneva.
Schwab, K. (2017, November). The global competitiveness report 2017. In World Economic Forum (Vol.
671).
Şener, S., & Sarıdoğan, E. (2011). The effects of science-technology-innovation on competitiveness and
economic growth. Procedia-Social and Behavioral Sciences, 24, 815–828.
Sinn, H. W. (2014). Austerity, growth and inflation: remarks on the Eurozone’s unresolved
competitiveness problem. The World Economy, 37(1), 1–13.
Siudek, T., & Zawojska, A. (2014). Competitiveness in the economic concepts, theories and empirical
research. Acta Scientiarum Polonorum. Oeconomia, 13(1).
Sofrankova, B., Kiselakova, D., & Cabinova, V. (2017). Innovation as a source of country’s global
competitiveness growth. In SHS Web of Conferences (Vol. 39, p. 01026). EDP Sciences.
Solow, R. M. (1956). A contribution to the theory of economic growth. The Quarterly Journal of
Economics, 70(1), 65–94.
Sölvell, Ö. (2015). The Competitive Advantage of Nations 25 years-opening up new perspectives on
competitiveness. Competitiveness Review, 25(5), 471.
Streimikiene, D. (2014). Business infrastructure for sustainability in developing economies. Amfiteatru
Economic, 16(37), 965–979.
Taner, B., Oncu, S., & Civi, E. (2000). The relationship between international trade and national
competitiveness. In First International Joint Symposium on Business Administration „Challenges
for Business Administrators in the New Millennium “: Selected Papers (pp. 371-383).
Tomaszewski, M., & Świadek, A. (2017). The impact of the economic conditions on the innovation
activity of the companies from selected Balkan states. Economic Research-Ekonomskaistraživanja,
30(1), 1896–1913.
Tsuji, M., Ueki, Y., Shigeno, H., Idota, H., & Bunno, T. (2018). R&D and non-R&D in the innovation
process among firms in ASEAN countries: based on firm-level survey data. European journal of
management and business economics, 27(2), 198–214.
Ulvedal, P. B. (2013). Macroeconomic Stability and Economic Growth in Developing Countries.
University of Oslo.
Windmeijer, F. (2005). A finite sample correction for the variance of linear efficient two-step GMM
estimators. Journal of Econometrics, 126(1), 25–51.
World Economic Forum. (2015). The global competitiveness report 2015–2016. Geneva: World
Economic Forum.
World Economic Forum. (2017). The global competitiveness report 2017–2018. Geneva: World
Economic Forum.

Publisher’s Note Springer Nature remains neutral with regard to jurisdictional claims in published
maps and institutional affiliations.

13