Dissemination of Two Faces of Knowledge: Do Liberal-Democracy and Income-Level Matter?

Many researchers have examined the functional relationship between the level of realized total factor productivity (TFP) and innovation, and the positive effect new ideas have on productivity. But, how do diverse ideas drive productivity? And do the home country’s levels of income, civil liberties and political rights influence the spillover effects of innovation? In this research, I answer these questions by using a new dataset on scientific publication. I separate innovations into technical and managerial, and then explore their effects on the economy, using pooled mean group estimations in a dynamic heterogeneous panel setting of 60 countries for the period 1996 to 2014. The findings show that, for high-income countries, domestic innovations in management are a significant source of change in productivity. In contrast, the estimated results do not support the role of the domestic development of management innovation in middle-income countries. However, in the long run, international spillovers of management ideas positively affect the productivity of these latter countries. Regardless of which metric is utilized in the analysis, national spillovers of management ideas increase the productivity of countries with the most-liberal democratic regimes. However, in democratic countries where the regime is only partially liberal, domestic management innovations have a depressing effect on productivity. This last result differs over the long run, as international spillovers of management ideas contribute to higher productivity in less-democratic countries. The results show that, in high-income countries, the elasticity of TFP in respect to management innovation is almost twice as large as it is for technical ideas. The results also indicate that increasing the number of researchers does not enhance the development of management innovation.