Quality of pro-market national institutions and firms’ decision to invest in R&D: evidence from developing and transition economies

Fulvio Castellacci, Prince C. Oguguo and Isabel Maria Bodas Freitas
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Prince C. Oguguo: Grenoble Ecole de Management

Eurasian Business Review, 2022, vol. 12, issue 1, No 2, 35-57

Abstract: Abstract Does institutional quality affect firms’ decision to invest in R&D? This paper investigates the idea that well-functioning pro-market institutions spur firms’ R&D propensity by reducing transaction costs and uncertainties related to research and innovation activities. Evidence from the World Bank Enterprise Surveys on a large sample of firms in 57 developing and transition economies between 2002 and 2017 corroborates this idea. Controlling for countries’ level of economic development, industry fixed effects and a number of firm-level characteristics, the results show that firms’ propensity to invest in R&D is higher in countries in which national institutions ensure socio-political stability and enforcement of law and contracts.

Keywords: R&D; Innovation; Institutional quality; Economic development; WBES data (search for similar items in EconPapers)
Date: 2022
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DOI: 10.1007/s40821-022-00202-7

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