The impact of country risk on innovation: Global evidence

Jun Wen, Hai-Peng Duan, Chun-Ping Chang and Xin-Xin Zhao

Economic Systems, 2025, vol. 49, issue 2

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.

Keywords: Innovation; Country risk; Macroeconomics (search for similar items in EconPapers)
JEL-codes: E60 F51 O35 (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecosys:v:49:y:2025:i:2:s0939362524000979

DOI: 10.1016/j.ecosys.2024.101275

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