Economic efficiency of investment in innovation in a knowledge-based economy

Abstract

The purpose of the study was to analyse the impact of gross domestic expenditure on research and development on key indicators of knowledge-based economy performance in the short- and long-term using data from developed and developing countries. The results of the study showed an increase in attention to investment in innovation in a global sense. The leading countries and regions for investment in innovation are the United States of America, the EU, China, and Japan. Regression analysis of the short-term impact of gross domestic expenditure on research and development on key indicators of economic efficiency (level of human development, productivity, and gross domestic product (GDP) per capita) revealed a statistically significant impact only on the indicator of the level of human development. But the analysis of the long-term impact of this indicator on the example of data from the EU countries revealed the statistical significance of this impact on all dependent variables. This proved that investments in innovation have a cumulative effect that manifests itself in the long term. The identified impact on the indicator of the level of human development in both the short and long term indicates the fundamental role of investment in innovation in such development. The analysis of data from Kosovo revealed an inverse correlation between gross domestic expenditure on research and development and GDP per capita and human development. This revealed the low efficiency of investment in innovation in the country and suggested that Kosovo may need more time to achieve a positive cumulative effect from investments. Accordingly, the government of Kosovo should build on the successful international experience of developed countries in developing innovation investment initiatives and establishing international cooperation. In addition, investing in innovation may not have an immediate positive effect, and it takes longer to achieve it.