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Research on the Dynamic Interrelationship among R&D Investment, Technological Innovation, and Economic Growth in China

Chao Liu () and Guanjun Xia ()
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Chao Liu: Business School, Hohai University, Nanjing 211100, China
Guanjun Xia: Business School, Hohai University, Nanjing 211100, China

Sustainability, 2018, vol. 10, issue 11, 1-19

Abstract: Technological innovation is an important driving force for a country’s sustainable economic development and social progress, and can be achieved through R&D investment, which would lead to sustainable economic growth. This process is one of the important steps for China to realize the transformation of the economic growth mode and the development from extensive to intensive type. Since R&D investment, technological innovation, and economic growth are mutually influential and inseparable, it is particularly important to understand the interrelationship between the three. By collating data from China from 1995 to 2016, this paper established an indicator system of R&D investment, technological innovation, and economic growth as research variables. Vector autoregression model, impulse response function, and variance decomposition function were adopted. A long-term stable dynamic interrelationship among the three was revealed. The empirical analysis showed that in recent years, the growth of R&D investment, technological innovation, and economic growth stagnated or even slowly declined, which indicated that the economic development had insufficient stamina. The conversion efficiency of R&D investment was not high, and R&D investment for short-term profit was ubiquitous. The innovation ability of scientific and technological achievements was not strong, the conversion rate of scientific and technological achievements was not high, and the market integration process was relatively slow. Overall, a good circular mechanism has not been established among R&D investment, technological innovation, and economic growth. Based on this, China should improve the mutual influence and interrelationship among R&D investment, technological innovation, and economic growth. The transmission mechanism among the three should be optimized and stable economic growth promoted, for example, by increasing R&D investment, enhancing the efficiency of R&D funds, improving the incentive system for scientific and technological innovation, and promting the effective use and marketization integration of innovation achievements.

Keywords: sustainable economic development; R&D investment; technological innovation; economic growth; VAR model (search for similar items in EconPapers)
JEL-codes: Q Q0 Q2 Q3 Q5 Q56 O13 (search for similar items in EconPapers)
Date: 2018
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