Panel Causality Analysis of the Relationship among the Rule of Law, Technological Advances, Competitiveness, and Value-Added

Öz

The status of countries within the global value chain varies depending on the importance of national production capabilities in the global economy. From this perspective, there is a need for a value-added production approach that focuses on innovation and competitiveness. Technological advances and institutions are considered to play a significant role in transforming the economy towards an innovation-driven one to meet these needs. The aim of this paper is to investigate the relationship among technological advances, the rule of law as a proxy for institutions, value-added production, and competitiveness in a way that reflects crosscountry divergence. Through an analysis employed independently of countries’ existing levels of development, it will be possible to evaluate whether the factors associated with institutions and innovation can produce similar results in all circumstances and for each country. In this context, a panel causality analysis that considers cross-sectional heterogeneity is employed. The analysis shows bidirectional causality between the variables, except for value-added to the rule of law. However, the results also support the existence of cross-country divergence. These findings suggest that future policy plans should be designed to consider the multidimensional nature of country-specific factors, alongside technological advances and the rule of law, and to ensure the integration of both national and international economic objectives. JEL Classification : F10 , P48 , O32 , O47

Anahtar Kelimeler

• Technological advance
• The rule of law
• Competitiveness
• Value-Added production

Kaynakça

1. Acemoğlu, D., & Robinson, J. A. (2000). Political losers as a barrier to economic development. American Economic Review, 90(2), 126-130. DOI: 10.1257/aer.90.2.126. google scholar
2. Aghion, P., & Howitt, P. (1992). A model of growth through creative destruction. Econometrica, 60(2), 323-351. https://doi.org/10.2307/2951599. google scholar
3. Aghion, P., Bloom, N., Blundell, R., Griffith, R., & Howitt, P. (2005). Competition and innovation: An inverted-U relationship. The quarterly journal of economics, 120(2), 701-728. https://doi. org/10.1093/qje/120.2.701. google scholar
4. Agostino, M., Nifo, A., Trivieri, F., & Vecchione, G. (2020). Rule of law and regulatory quality as drivers of entrepreneurship. Regional Studies, 54(6), 814-826. https://doi.org/10.1080/0034340 4.2019.1648785. google scholar
5. Aiginger, K. (1998). A framework for evaluating the dynamic competitiveness of countries. Structural change and economic dynamics, 9(2), 159-188. https://doi.org/10.1016/S0954-349X(97)00026-X google scholar
6. Amendola, G., Dosi, G., & Papagni, E. (1993). The dynamics of international competitiveness. Weltwirtschaftliches Archiv, 129(3), 451-471. https://doi.org/10.1007/BF02707997. google scholar
7. Androniceanu, A. M., Kinnunen, J., Georgescu, I., & Androniceanu, A. (2020). A multidimensional approach to competitiveness, innovation and well-being in the EU using canonical correlation analysis. Journal of Competitiveness, 12(4), 5-21. https://doi.org/10.9770/ird.2019.1.1(3). google scholar
8. Arjun, K., Sankaran, A., Kumar, S., & Das, M. (2020). An endogenous growth approach on the role of energy, human capital, finance and technology in explaining manufacturing value-added: A multi-country analysis. Heliyon, 6(7), e04308. doi.org/10.1016/j.heliyon.2020.e04308. google scholar

9. Ayres, R. U. (1990). Technological transformations and long waves Part I. Technological Forecasting and Social Change, 37(1), 1-37. doi.org/10.1016/0040-1625(90)90057-3. google scholar
10. Barbero, J., Mandras, G., Rodrı'guez-Crespo, E., & Rodrı'guez-Pose, A. (2021). Quality of government and regional trade: evidence from European Union regions. Regional Studies, 55(7), 1240-1251. google scholar
11. Barge-Gil, A., & Modrego, A. (2011). The impact of research and technology organizations on firm competitiveness. Measurement and determinants. The Journal of Technology Transfer, 36, 61-83. https://doi.org/10.1007/s10961-009-9132-4. google scholar
12. Baumann, J., & Kritikos, A. S. (2016). The link between R&D, innovation and productivity: Are micro firms different?. Research Policy, 45(6), 1263-1274. https://doi.org/10.1016/j.respol.2016.03.008. google scholar
13. Baumol, W. J. (1996). Entrepreneurship: Productive, unproductive, and destructive. Journal of Business Venturing, 11(1), 3-22. https://doi.org/10.1016/0883-9026(94)00014-X. google scholar
14. Boudreaux, C. J. (2017). Institutional quality and innovation: some cross-country evidence. Journal of Entrepreneurship and Public Policy, 6(1), 26-40. https://doi.org/10.1108/JEPP-04-2016-0015. google scholar
15. Breusch, T. S., & Pagan, A. R. (1980). The Lagrange multiplier test and its applications to model specification in econometrics. The Review of Economic Studies, 47(1), 239-253. https://doi. org/10.2307/2297111. google scholar
16. Camina, E., Diaz-Chao, A., & Torrent-Sellens, J. (2020). Automation technologies: Long-term effects for Spanish industrial firms. Technological Forecasting and Social Change, 151, 119828. doi.org/10.1016/j.techfore.2019.119828. google scholar
17. Chandran, V. G. R., KKV, G. K., & Devadason, E. S. (2017). Value-added performance in Malaysian manufacturing: to what extent research and development and human capital matter?. Institutions and Economies, 9(4), 31-51. google scholar
18. Chaudhry, A., & Garner, P. (2007). Do governments suppress growth? Institutions, rent-seeking, and innovation blocking in a model of Schumpeterian growth. Economics & Politics, 19(1), 35-52. https://doi.org/10.1111/j.1468-0343.2007.00301.x. google scholar
19. Chikan, A. (2008). National and firm competitiveness: a general research model. Competitiveness Review: An International Business Journal, 18(1/2), 20-28. doi.org/10.1108/10595420810874583. google scholar
20. Costantini, V., & Mazzanti, M. (2012). On the green and innovative side of trade competitiveness? The impact of environmental policies and innovation on EU exports. Research Policy, 41(1), 132153. https://doi.org/10.1016/j.respol.2011.08.004. google scholar
21. D’Ingiullo, D., Di Berardino, C., Odoardi, I., & Quaglione, D. (2023). Rule of law as a determinant of the export performance of Italian provinces. Journal of Institutional Economics, 19(4), 548-563. https://doi.org/10.1017/S1744137422000480. google scholar
22. Demir, F., & Hu, C. (2022). Institutional similarity, firm heterogeneity and export sophistication. The World Economy, 45(4), 1213-1241. https://doi.org/10.1111/twec.13201. google scholar
23. Dobrzanski, P., Bobowski, S., Chrysostome, E., Velinov, E., & Strouhal, J. (2021). Toward innovation-driven competitiveness across African countries: an analysis of efficiency of R&D expenditures. Journal of Competitiveness, 13(1), 5-22. http://dx.doi.org/10.7441/joc.2021.01.01. google scholar
24. Dosi, G., Pavitt, K., & Soete, L. (1990). The Economics of Technical Change. New York: Harvester. google scholar
25. Dosi, G., Grazzi, M., & Moschella, D. (2015). Technology and costs in international competitiveness: From countries and sectors to firms. Research Policy, 44(10), 1795-1814. https://doi. org/10.1016/j.respol.2015.05.012. google scholar
26. Dosi, G., & Nelson, R. R. (2010). Technıcal change and industrial dynamics as evolutionary processes. In B. H. Hall & N. Rosenberg (Eds.). Handbook of The Economics of Innovation, Vol.1. Oxford: North-Holland. google scholar
27. Dumitrescu, E. I., & Hurlin, C. (2012). Testing for Granger non-causality in heterogeneous panels. Economic Modelling, 29(4), 1450-1460. doi.org/10.1016/j.econmod.2012.02.014. google scholar
28. Erkan, B., & Yildirimci, E. (2015). Economic complexity and export competitiveness: The case of Turkey. Procedia-Social and Behavioral Sciences, 195, 524-533. https://doi.org/10.1016/j. sbspro.2015.06.262. google scholar
29. European Commission (2021). Updating the 2020 new industrial strategy: building a stronger single market for Europe’s recovery. Brussels: European Commission. google scholar
30. European Commission (2022). European innovation scoreboard 2022. Luxembourg: Publications Office of the European Union. google scholar
31. Fagerberg, J. (1988). International competitiveness. The Economic Journal, 98(391), 355-374. https:// doi.org/10.2307/2233372. google scholar
32. Fagerberg, J. (1996). Technology and competitiveness. Oxford Review of Economic Policy, 12(3), 3951. doi.org/10.1093/oxrep/12.3.39. google scholar
33. Fankhauser, S., Bowen, A., Calel, R., Dechezlepretre, A., Grover, D., Rydge, J., & Sato, M. (2013). Who will win the green race? In search of environmental competitiveness and innovation. Global Environmental Change, 23(5), 902-913. https://doi.org/10.1016/j.gloenvcha.2013.05.007. google scholar
34. Fernando, Y., Tseng, M. L., Sroufe, R., Abideen, A. Z., Shaharudin, M. S., & Jose, R. (2021). Eco-innovation impacts on recycled product performance and competitiveness: Malaysian automotive industry. Sustainable Production and Consumption, 28, 1677-1686. doi.org/10.1016/j.spc.2021.09.010. google scholar
35. Friedman, B. M. (2008). Economic well-being in a historical context. In Pecchi, L., & Piga, G. (Eds.). Revisiting Keynes: economic possibilities for our grandchildren. London: MIT Press. google scholar
36. Filo, C. (2007). Territorial competitiveness and the human factors. International Conference of Territorial Intelligence, 323-336. google scholar
37. Galindo-Rueda, F., & Verger, F. (2016). OECD taxonomy of economic activities based on r&d intensity. OECD Science, Technology and Industry Working Papers 2016/04. dx.doi. org/10.1787/5jlv73sqqp8r-en. google scholar
38. Gandolfo, G., & Trionfetti, F. (2014). International trade theory and policy. Berlin, Heidelberg, New York: Springer. google scholar
39. Goldin, C., & Katz, L. F. (1998). The origins of technology-skill complementarity. The Quarterly Journal of Economics, 113(3), 693-732. https://doi.org/10.1162/003355398555720. google scholar
40. Griliches, Z. (1986). Productivity, r&d, and basic research at the firm level in the 1970’s. The American Economic Review, 76(1), 141-154. google scholar
41. Grossman, G. M., & Helpman, E. (1991). Innovation and growth in the global economy. Cambridge: The MIT Press. google scholar
42. Gustavsson, P., Hansson, P., & Lundberg, L. (1999). Technology, resource endowments and international competitiveness. European Economic Review, 43(8), 1501-1530. https://doi. org/10.1016/S0014-2921(98)00027-0. google scholar
43. Haggard, S., MacIntyre, A., & Tiede, L. (2008). The rule of law and economic development. Annual Review of Political Science, 11, 205-234. https://doi.org/10.1146/annurev.polisci.10.081205.100244. google scholar
44. Hall, R. E., & Jones, C. I. (1999). Why do some countries produce so much more output per worker than others?. The Quarterly Journal of Economics, 114(1), 83-1 16. https://doi. org/10.1162/003355399555954. google scholar
45. Hall, B. H., & Mairesse, J. (1995). Exploring the relationship between R&D and productivity in French manufacturing firms. Journal of Econometrics, 65(1), 263-293. https://doi.org/10.1016/0304-4076(94)01604-X. google scholar
46. Harvard Growth Lab (2023). The atlas of economic complexity database. https://atlas.cid.harvard. edu/rankings. google scholar
47. Hausmann, R., Hidalgo, C. A., Bustos, S., Coscia, M., & Simoes, A. (2014). The atlas of economic complexity: Mapping paths to prosperity. The Mit Press. google scholar
48. Hausmann, R., Hwang, J., & Rodrik, D. (2007). What you export matters. Journal of Economic Growth, 12, 1-25. DOI 10.1007/s10887-006-9009-4. google scholar
49. Hchaichi, R., & Ghodbane, S. B. (2014). Empirical analysis of determinants of international competitiveness. International Journal of Business and Social Science, 5(5), 203-209. google scholar
50. Hu, Y., Sun, S., & Dai, Y. (2021). Environmental regulation, green innovation, and international competitiveness of manufacturing enterprises in China: From the perspective of heterogeneous regulatory tools. PLoS One, 16(3), e0249169. https://doi.org/10.1371/journal.pone.0249169. google scholar
51. IMD (2020). IMD World competitiveness booklet. Lausanne: International Institute for Management Development. google scholar
52. Ivanova, I., Strand, 0., Kushnir, D., & Leydesdorff, L. (2017). Economic and technological complexity: A model study of indicators of knowledge-based innovation systems. Technological Forecasting and Social Change, 120, 77-89. https://doi.org/10.1016/j.techfore.2017.04.007. google scholar
53. Kafouros, M. I. (2005). R&D and productivity growth: Evidence from the UK. Economics of Innovation and New Technology, 14(6), 479-497. https://doi.org/10.1080/1043859042000269098. google scholar
54. Kaufmann, D., Kraay, A., & Mastruzzi, M. (2011). The worldwide governance indicators: Methodology and analytical issues. Hague Journal on the Rule of Law, 3(2), 220-246. https://doi.org/10.1017/ S1876404511200046. google scholar
55. Khan, B. Z., & Sokoloff, K. L. (2004). Institutions and technological innovation during the early economic growth: evidence from the great inventors of the United States, 1790-1930. National Bureau of Economic Research No. w10966. google scholar
56. Khandelwal, A. K., Schott, P. K., & Wei, S. J. (2013). Trade liberalization and embedded institutional reform: Evidence from Chinese exporters. American Economic Review, 103(6), 2169-2195. google scholar
57. Krammer, S. M. (2015). Do good institutions enhance the effect of technological spillovers on productivity? Comparative evidence from developed and transition economies. Technological Forecasting and Social Change, 94, 133-154. http://dx.doi.org/10.1016/j.techfore.2014.09.002. google scholar
58. Lall, S. (2000). The technological structure and performance of developing country manufactured exports, 1985-98. Oxford Development Studies, 28(3), 337-369. https://doi. org/10.1080/713688318. google scholar
59. Lentz, R., & Mortensen, D. T. (2008). An empirical model of growth through product innovation. Econometrica, 76(6), 1317-1373. doi.org/10.3982/ECTA5997. google scholar
60. Levchenko, A. A. (2007). Institutional quality and international trade. The Review of Economic Studies, 74(3), 791-819. https://doi.org/10.1111/j.1467-937X.2007.00435.x. google scholar
61. Lin, Y., Lin, S., Wang, X., & Wu, J. (2021). Does institutional quality matter for export product quality? Evidence from China. The Journal of International Trade & Economic Development, 30(7), 10771100. google scholar
62. Lin, J. Y., & Nugent, J. B. (1995). Institutions and economic development. Handbook of Development Economics, 3A, 2301-2370. https://doi.org/10.1016/S1573-4471(05)80010-5. google scholar
63. Lundvall, B. (2010). National systems of innovation: toward a theory of innovation and interactive learning. London: The Anthem Press. google scholar
64. Milberg, W., & Houston, E. (2005). The high road and the low road to international competitiveness: Extending the neo-Schumpeterian trade model beyond technology. International Review of Applied Economics, 19(2), 137-162. https://doi.org/10.1080/02692170500031646. google scholar
65. Mokyr, J. (1992). The lever of riches: technological creativity and economic progress. New York: Oxford University Press. google scholar
66. Narula, R., & Wakelin, K. (1998). Technological competitiveness, trade and foreign direct investment. Structural Change and Economic Dynamics, 9(3), 373-387. https://doi.org/10.1016/ S0954-349X(98)00034-4. google scholar
67. North, D. C. (1991). Institutions, Journal of Economic Perspectives, 5(1), 97-112. google scholar
68. Nunn, N. (2007). Relationship-specificity, incomplete contracts, and the pattern of trade. The Quarterly Journal of Economics, 122(2), 569-600. https://doi.org/10.1162/qjec.122.2.569. google scholar
69. OECD (2023). OECD.ai policy observatory database. https://oecd.ai/en/trends-and-data. google scholar
70. Ollo-Lopez, A., & Aramendı'a-Muneta, M. E. (2012). ICT impact on competitiveness, innovation and environment. Telematics and Informatics, 29(2), 204-210. https://doi.org/10.1016/j.tele.2011.08.002. google scholar
71. Padula, G., Novelli, E., & Conti, R. (2015). SMEs inventive performance and profitability in the markets for technology. Technovation, 41, 38-50. doi.org/10.1016/j.technovation.2015.01.002. google scholar
72. Pesaran, M. H. (2004). General diagnostic tests for cross section dependence in panels. CESifo Working Paper No. 1229. google scholar
73. Pesaran, M. H. (2007). A simple panel unit root test in the presence of cross-section dependence. Journal of Applied Econometrics, 22(2), 265-312. https://doi.org/10.1002/jae.951. google scholar
74. Pesaran, M. H., Ullah, A., & Yamagata, T. (2008). A bias-adjusted LM test of error cross-section independence. The Econometrics Journal, 11(1), 105-127. https://doi. org/10.1111/j.1368-423X.2007.00227.x. google scholar
75. Pesaran, M. H., & Yamagata, T. (2008). Testing slope homogeneity in large panels. Journal of Econometrics, 142(1), 50-93. https://doi.org/10.1016/j.jeconom.2007.05.010. google scholar
76. Petrakis, P. E., Kostis, P. C., & Valsamis, D. G. (2015). Innovation and competitiveness: Culture as a long-term strategic instrument during the European Great Recession. Journal of Business Research, 68(7), 1436-1438. https://doi.org/10.1016/j.jbusres.2015.01.029. google scholar
77. Popkova, E., Gornostaeva, Z., & Tregulova, N. (2018). Role of innovations in provision of competitiveness and innovational development of economy and overcoming of “underdevelopment whirlpools” in Russia and countries of Eastern Europe. Journal of Entrepreneurship in Emerging Economies, 10(3), 511-523. doi.org/10.1108/JEEE-12-2017-0100. google scholar
78. Posner, M. V. (1961). International trade and technical change. Oxford Economic Papers, 13(3), 323341. https://doi.org/10.1093/oxfordjournals.oep.a040877. google scholar
79. Ranjan, P., & Lee, J. Y. (2007). Contract enforcement and international trade. Economics & Politics, 19(2), 191-218. https://doi.org/10.1111/j.1468-0343.2007.00308.x. google scholar
80. Rodrik, D. (2009). One Economics, Many Recipes. Princeton and Oxford: Princeton University Press. google scholar
81. Roper, S., & Arvanitis, S. (2012). From knowledge to added value: A comparative, panel-data analysis of the innovation value chain in Irish and Swiss manufacturing firms. Research Policy, 41(6), 10931106. doi.org/10.1016/j.respol.2012.03.002. google scholar
82. Silve, F., & Plekhanov, A. (2018). Institutions, innovation and growth: Evidence from industry data. Economics of Transition, 26(3), 335-362. https://doi.org/10.1111/ecot.12148. google scholar
83. Schwab, K. (2010). The Global competitiveness report 2010-2011. Geneva: World Economic Forum. google scholar
84. Sharma, A., Sousa, C., & Woodward, R. (2022). Determinants of innovation outcomes: The role of institutional quality. Technovation, 118, 102562. https://doi.org/10.1016/j. technovation.2022.102562. google scholar
85. Soltmann, C., Stucki, T., & Woerter, M. (2015). The impact of environmentally friendly innovations on value added. Environmental and Resource Economics, 62, 457-479. doi.org/10.1007/s10640-014-9824-6. google scholar
86. T.C. Strateji ve Bütçe Başkanlığı (2019). On birinci kalkınma planı (2019-2023). Ankara: Strateji ve Bütçe Başkanlığı Yayınları. google scholar
87. Tebaldi, E., & Elmslie, B. (2008). Institutions, innovation and economic growth. Journal of Economic Development, 33(2), 27. http://dx.doi.org/10.35866/caujed.2008.33.2.002. google scholar
88. Tebaldi, E., & Elmslie, B. (2013). Does institutional quality impact innovation? Evidence from cross-country patent grant data. Applied Economics, 45(7), 887-900. https://doi.org/10.1080/0003684 6.2011.613777. google scholar
89. Tsang, E. W., Yip, P. S., & Toh, M. H. (2008). The impact of R&D on value added for domestic and foreign firms in a newly industrialized economy. International Business Review, 17(4), 423-441. https://doi.org/10.1016/j.ibusrev.2008.02.005. google scholar
90. Türker, M. V., & İnel, M. N. (2013). Is it enough to be entrepreneurial? enhancing the ‘Value added’created by SMEs in turkey through innovation. Procedia-Social and Behavioral Sciences, 75, 397-406. doi.org/10.1016/j.sbspro.2013.04.044. google scholar
91. UNIDO (2023). UNIDO Statistics Data Portal. https://stat.unido.org/. google scholar
92. United Nations (2009). System of national accounts 2008. New York: United Nations. google scholar
93. Van Elk, R., ter Weel, B., van der Wiel, K., & Wouterse, B. (2019). Estimating the returns to public R&D investments: Evidence from production function models. De Economist, 167, 45-87. https:// doi.org/10.1007/s10645-019-09331-3. google scholar
94. Williamson, O. E. (1998). The institutions of governance. The American Economic Review, 88(2), 7579. google scholar
95. Woo, S., Jang, P., & Kim, Y. (2015). Effects of intellectual property rights and patented knowledge in innovation and industry value added: A multinational empirical analysis of different industries. Technovation, 43, 49-63. doi.org/10.1016/j.technovation.2015.03.003. google scholar
96. Yasmeen, R., Zhang, X., Tao, R., & Shah, W. U. H. (2023). The impact of green technology, environmental tax and natural resources on energy efficiency and productivity: Perspective of OECD Rule of Law. Energy Reports, 9, 1308-1319. google scholar
97. Zheng, L., Abbasi, K. R., Salem, S., Irfan, M., Alvarado, R., & Lv, K. (2022). How technological innovation and institutional quality affect sectoral energy consumption in Pakistan?: Fresh policy insights from novel econometric approach. Technological Forecasting and Social Change, 183, 121900. doi.org/10.1016/j.techfore.2022.121900. google scholar