Globalization and the Determinants of Innovation in BRICS Versus OECD Economies: A Macroeconomic Study

Abstract

This study examines the influence of select macroeconomic variables and globalization variables on the volume of patented innovations in five industrialized OECD countries (the U.S., the U.K., Germany, Japan, and Australia) and in five emerging countries known as BRICS (Brazil, Russia, India, China, and South Africa). The regression results indicate that trade openness has a more positive impact in boosting innovation in BRICS than in the five OECD countries, whereas ethnic diversity and R&D expenditure have a more positive influence on innovation activities in OECD countries than in BRICS. Surprisingly, despite popular presumption that the Internet has dramatically leveled the innovation playing field by making distant communication and idea pooling faster and cheaper, in our regression results, we find little support to the notion. It appears that emerging countries need to find new ways to leverage ethnic diversity and R&D expenditure as catalysts for innovation. A caveat to our findings is potential bias in our data, first from the choice of which countries to include but also from the quality and quantity of data within the countries. We must also keep in mind the potential socio-political factors behind the issuance of patents. However, we nonetheless believe this study to be an insightfully comparative exploration of some macro determinants of innovation.

Keywords: Innovation, R&D, OECD, BRICS, Emerging countries

JEL Classification: F,O