Connecting the dots between democracy and innovation: The role of pro-market institutions and information processing

Hyungseok Yoon, Christopher Boudreaux and Namil Kim

Research Policy, 2024, vol. 53, issue 8

Abstract: Prior studies examining the democracy-innovation relationship have reported mixed results. To resolve this tension, our framework grounded in information processing and institutional theory proposes two mechanisms through which democracy influences innovation—pro-market institutions and information processing. Our analysis reveals that democracy indirectly affects innovation primarily through information processing rather than pro-market institutions. While gradually or increasingly democratizing states tend to focus on adopting pro-market systems without considering information freedom (e.g., lifting censorship), our results underscore the importance of information processing for strengthening the democracy-innovation relationship. Our study extends the literature on national innovation rates by shedding light on the information processing implications of democratic institutions.

Keywords: Democracy; Information processing; Innovation; Pro-market institutions (search for similar items in EconPapers)
JEL-codes: L26 M13 O30 P16 (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:eee:respol:v:53:y:2024:i:8:s0048733324001069

DOI: 10.1016/j.respol.2024.105057

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