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The impact of country risk on innovation: Global evidence

Author

Listed:
  • Wen, Jun
  • Duan, Hai-Peng
  • Chang, Chun-Ping
  • Zhao, Xin-Xin

Abstract

This article examines the impact of country risk on the level of innovation. Through empirical analysis of unbalanced panel data from 106 countries around the world from 1990 to 2020, we find that reducing country risk has a pro-innovation effect, and this conclusion holds after a series of robustness tests. We also find that the impact of country risk on innovation is more significant in countries with better infrastructure, democracies, lower income, lower political stability, and countries governed by left-wing parties. The impact of country risk on innovation is also more significant in high-tech industries than in traditional manufacturing industries. The mechanism analysis shows that country risk reduction promotes innovation by increasing and improving government efficiency, human capital, and the business environment. This study expands the research areas related to country risk and provides evidence for understanding the relationship between country risk and innovation.

Suggested Citation

  • Wen, Jun & Duan, Hai-Peng & Chang, Chun-Ping & Zhao, Xin-Xin, 2025. "The impact of country risk on innovation: Global evidence," Economic Systems, Elsevier, vol. 49(2).
    • Handle: RePEc:eee:ecosys:v:49:y:2025:i:2:s0939362524000979
    DOI: 10.1016/j.ecosys.2024.101275
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    More about this item

    Keywords

    Innovation; Country risk; Macroeconomics;
    All these keywords.

    JEL classification:

    • E60 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - General
    • F51 - International Economics - - International Relations, National Security, and International Political Economy - - - International Conflicts; Negotiations; Sanctions
    • O35 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Social Innovation

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