Innovation and Economic Growth in the Top Five Southeast Asian Economies: A Decomposition Analysis

Authors

  • Irsan Hardi Economic Modeling and Data Analytics Unit, Graha Primera Saintifika, Aceh Besar 23371, Indonesia
  • Samrat Ray Business Analytics, International Institute of Management Studies, Pune 411002, India
  • Muhammad Umer Quddoos Attari Department of Commerce, Faculty of Commerce, Banking and Business Administration, Bahauddin Zakariya University, Multan 60800, Pakistan
  • Najabat Ali School of Business, Soochow University, Suzhou 215021, China
  • Ghalieb Mutig Idroes Department of Economics, Faculty of Economics and Business, University of Syiah Kuala, Banda Aceh 23111, Indonesia

DOI:

https://doi.org/10.60084/eje.v2i1.145

Keywords:

GDP, Global innovation index, Indonesia, Thailand, Singapore, Malaysia, Vietnam

Abstract

Innovation has the potential to act as a double-edged sword in impacting economic growth. While it serves as a powerful driver of economic advancement, it also carries risks alongside its benefits. Recognizing this duality, our study aims to fill the identified gap and add comprehensiveness to the literature by assessing the individual impact of innovation indicators on economic growth in the top five Southeast Asian countries based on GDP: Indonesia, Thailand, Singapore, Malaysia, and Vietnam. The innovation aspect comprises 21 indicators from the Global Innovation Index (GII), grouped into seven categories: institution, human capital and research, infrastructure, market sophistication, business sophistication, knowledge and technology outputs, and creative outputs. Both panel analysis and country-specific assessments consistently conclude that innovation significantly influences economic growth. However, delving into the categorized indicators reveals intriguing insights. While all the indicators demonstrate a notable impact, most of them are found to hinder rather than foster economic growth. This compelling empirical evidence underscores that innovation in the selected countries has yet to be optimized, highlighting the urgent need to implement innovation-friendly policies, including removing innovation barriers, targeting investment in key sectors, and fostering education and skills development. This holistic approach aims to cultivate an environment conducive to innovation, thereby solidifying innovation's role as one of the primary drivers of economic growth.

Downloads

Download data is not yet available.

References

  1. Carlaw, K. I., and Lipsey, R. G. (2003). Productivity, Technology and Economic Growth: What is the Relationship?, Journal of Economic Surveys, Vol. 17, No. 3, 457–495. doi:10.1111/1467-6419.00201.
  2. Kim, Y. E., Loayza, N., and Meza Cuadra Balcazar, C. M. (2016). Productivity as the Key to Economic Growth and Development, World Bank Research and Policy Briefs, No. 108092.
  3. Gardiner, B., Martin, R., and Tyler, P. (2012). Competitiveness, Productivity and Economic Growth Across the European Regions, Regional Competitiveness, Routledge, 55–77.
  4. Rauf, A., Ali, N., Sadiq, M. N., Abid, S., Kayani, S. A., and Hussain, A. (2023). Foreign Direct Investment, Technological Innovations, Energy Use, Economic Growth, and Environmental Sustainability Nexus: New Perspectives in BRICS Economies, Sustainability, Vol. 15, No. 18, 14013. doi:10.3390/su151814013.
  5. McMillan, M., and Rodrik, D. (2011). Globalization, Structural Change and Productivity Growth, Cambridge, MA. doi:10.3386/w17143.
  6. Khan, S. A. R., Godil, D. I., Quddoos, M. U., Yu, Z., Akhtar, M. H., and Liang, Z. (2021). Investigating the Nexus between Energy, Economic Growth, and Environmental Quality: A Road Map for the Sustainable Development, Sustainable Development, Vol. 29, No. 5, 835–846. doi:10.1002/sd.2178.
  7. Haseeb, A., Xia, E., Saud, S., Usman, M., and Quddoos, M. U. (2023). Unveiling the Liaison between Human Capital, Trade Openness, and Environmental Sustainability for BRICS Economies: Robust Panel‐data Estimation, Natural Resources Forum, Vol. 47, No. 2, 229–256. doi:10.1111/1477-8947.12277.
  8. Hardi, I., Idroes, G. M., Hardia, N. A. K., Fajri, I., Furqan, N., Noviandy, T. R., and Utami, R. T. (2023). Assessing the Linkage Between Sustainability Reporting and Indonesia’s Firm Value: The Role of Firm Size and Leverage, Indatu Journal of Management and Accounting, Vol. 1, No. 1, 21–28. doi:10.60084/ijma.v1i1.79.
  9. Thurik, R., and Wennekers, S. (2004). Entrepreneurship, Small Business and Economic Growth, Journal of Small Business and Enterprise Development, Vol. 11, No. 1, 140–149. doi:10.1108/14626000410519173.
  10. Acs, Z. J., and Szerb, L. (2007). Entrepreneurship, Economic Growth and Public Policy, Small Business Economics, Vol. 28, Nos. 2–3, 109–122. doi:10.1007/s11187-006-9012-3.
  11. Ali, N., Phoungthong, K., Khan, A., Abbas, S., Dilanchiev, A., Tariq, S., and Sadiq, M. N. (2023). Does FDI Foster Technological Innovations? Empirical Evidence from BRICS Economies, PLOS ONE, Vol. 18, No. 3, e0282498. doi:10.1371/journal.pone.0282498.
  12. Gaganpreet Kaur Ahluwalia Dhirendra Kumar, Ragini S. Bhat, Samrat Ray, V. N. (2023). A Study on Demand and Supply Side Forces of Global Space Economy and Its Various Determinants, European Economic Letters (EEL), Vol. 13, No. 4, 174–186.
  13. Hardi, I., Idroes, G. M., Utami, R. T., Dahlia, P., Mirza, M. A. F., Humam, R. A., Chairunnisa, R., Hardia, N. A. K., and Mahdani, R. (2023). Dynamic Impact of Inflation and Exchange Rate in Indonesia’s Top 10 Market Capitalization Companies: Implications for Stock Prices, Indatu Journal of Management and Accounting, Vol. 1, No. 2, 51–59. doi:10.60084/ijma.v1i2.110.
  14. Hipple, S. (1997). Worker Displacement in an Expanding Economy, Monthly Lab. Rev., Vol. 120, 26.
  15. Krebs, T. (2007). Job Displacement Risk and the Cost of Business Cycles, American Economic Review, Vol. 97, No. 3, 664–686. doi:10.1257/aer.97.3.664.
  16. Morrison, A., Breen, J., and Ali, S. (2003). Small Business Growth: Intention, Ability, and Opportunity, Journal of Small Business Management, Vol. 41, No. 4, 417–425. doi:10.1111/1540-627X.00092.
  17. Taiwo, M. A., Ayodeji, A. M., and Yusuf, B. A. (2013). Impact of Small and Medium Enterprises on Economic Growth and Development, American Journal of Business and Management, Vol. 2, No. 1, 18. doi:10.11634/21679606170644.
  18. Idroes, G. M., Syahnur, S., Majid, M. S. A., Idroes, R., Kusumo, F., and Hardi, I. (2023). Unveiling the Carbon Footprint: Biomass vs. Geothermal Energy in Indonesia, Ekonomikalia Journal of Economics, Vol. 1, No. 1, 10–18. doi:10.60084/eje.v1i1.47.
  19. Idroes, G. M., Hardi, I., Nasir, M., Gunawan, E., Maulidar, P., and Maulana, A. R. R. (2023). Natural Disasters and Economic Growth in Indonesia, Ekonomikalia Journal of Economics, Vol. 1, No. 1, 33–39. doi:10.60084/eje.v1i1.55.
  20. Ray, S., and Hardi, I. (2024). Refining ESG Disclosure’s Role in Corporate Economic, Environmental, and Social Sustainability Performance, Indatu Journal of Management and Accounting, Vol. 2, No. 1, 1–8. doi:10.60084/ijma.v2i1.144.
  21. Dobrotă, C. E., Marcu, N., Siminică, M., and Nețoiu, L. M. (2019). Disparities, Gaps and Evolution Trends of Innovation, as a Vector, Romanian Journal of Economic Forecasting, Vol. 22, No. 4, 174.
  22. Cornett, A. P., and Sørensen, N. K. (2013). Innovation and Regional Disparities–a Survey of Regional Growth Drivers and Economic Performance: Andreas P. Cornett and Nils Karl Sørensen, Innovation, Technology and Knowledge, Routledge, 98–125.
  23. Hardi, I., Saputra, J., Hadiyani, R., Maulana, A. R. R., and Idroes, G. M. (2023). Decrypting the Relationship Between Corruption and Human Development: Evidence from Indonesia, Ekonomikalia Journal of Economics, Vol. 1, No. 1, 1–9. doi:10.60084/eje.v1i1.22.
  24. Alcouffe, A., and Kuhn, T. (2004). Schumpeterian Endogenous Growth Theory and Evolutionary Economics, Journal of Evolutionary Economics, Vol. 14, No. 2, 223–236. doi:10.1007/s00191-004-0205-0.
  25. Verspagen, B. (2007). Innovation and Economic Growth Theory: A Schumpeterian Legacy and Agenda, Perspectives on Innovation, 42–63.
  26. Aghion, P., Akcigit, U., and Howitt, P. (2015). Lessons from Schumpeterian Growth Theory, American Economic Review, Vol. 105, No. 5, 94–99. doi:10.1257/aer.p20151067.
  27. World Intellectual Property Organization. (2023). Global Innovation Index 2023, from https://www.wipo.int/global_innovation_index/en/2023/.
  28. Booth, A. (2013). Education and Economic Development in Southeast Asia: Myths and Realities, Southeast Asian Paper Tigers, Routledge, 173–195.
  29. Ullah, A. K. M. A., Mohamad, S. M., Hassan, N. H., and Chattoraj, D. (2019). Global Skills Deficiency: Perspectives of Skill Mobility in Southeast Asian Countries, Asian Education and Development Studies, Vol. 8, No. 4, 416–432. doi:10.1108/AEDS-12-2018-0185.
  30. Bhaskaran, M. (2010). Review of Southeast Asian Economic Developments, Southeast Asian Affairs, 23–43.
  31. Basri, M. C., and Hill, H. (2020). The Southeast Asian Economies in the Age of Discontent, Asian Economic Policy Review, Vol. 15, No. 2, 185–209. doi:10.1111/aepr.12305.
  32. Hardi, I., Dawood, T. C., and Syathi, P. B. (2021). Determinants Comparative Advantage of Non-Oil Export 34 Provinces in Indonesia, International Journal of Business, Economics, and Social Development, Vol. 2, No. 3, 98–106. doi:10.46336/ijbesd.v2i3.137.
  33. Bong, A., and Premaratne, G. (2018). Regional Integration and Economic Growth in Southeast Asia, Global Business Review, Vol. 19, No. 6, 1403–1415. doi:10.1177/0972150918794568.
  34. Jones, L., and Hameiri, S. (2020). Southeast Asian Regional Governance: Political Economy, Regulatory Regionalism and ASEAN Integration, 199–224. doi:10.1007/978-3-030-28255-4_8.
  35. Hardi, I., Ringga, E. S., Fijay, A. H., Maulana, A. R. R., Hadiyani, R., and Idroes, G. M. (2023). Decomposed Impact of Democracy on Indonesia’s Economic Growth, Ekonomikalia Journal of Economics, Vol. 1, No. 2, 51–60. doi:10.60084/eje.v1i2.80.
  36. Jones, G. W. (2002). Southeast Asian Urbanization and the Growth of Mega-Urban Regions, Journal of Population Research, Vol. 19, No. 2, 119–136. doi:10.1007/BF03031973.
  37. Yap, K. S. (2011). Urban Challenges in Southeast Asia, UN ESCAP.
  38. Hasan, I., and Tucci, C. L. (2010). The Innovation–Economic Growth Nexus: Global Evidence, Research Policy, Vol. 39, No. 10, 1264–1276. doi:10.1016/j.respol.2010.07.005.
  39. Thompson, M. (2018). Social Capital, Innovation and Economic Growth, Journal of Behavioral and Experimental Economics, Vol. 73, 46–52. doi:10.1016/j.socec.2018.01.005.
  40. Bilbao‐Osorio, B., and Rodríguez‐Pose, A. (2004). From R&D to Innovation and Economic Growth in the EU, Growth and Change, Vol. 35, No. 4, 434–455. doi:10.1111/j.1468-2257.2004.00256.x.
  41. Pece, A. M., Simona, O. E. O., and Salisteanu, F. (2015). Innovation and Economic Growth: An Empirical Analysis for CEE Countries, Procedia Economics and Finance, Vol. 26, 461–467. doi:10.1016/S2212-5671(15)00874-6.
  42. Maradana, R. P., Pradhan, R. P., Dash, S., Gaurav, K., Jayakumar, M., and Chatterjee, D. (2017). Technological Innovation and Economic Growth: A Brief Report on the Evidence, Journal of Innovation and Entrepreneurship, Vol. 6, No. 1, 1. doi:10.1186/s13731-016-0061-9.
  43. Broughel, J., and Thierer, A. D. (2019). Technological Innovation and Economic Growth: A Brief Report on the Evidence, SSRN Electronic Journal. doi:10.2139/ssrn.3346495.
  44. Degelsegger-Márquez, A., Remøe, S. O., and Trienes, R. (2018). Regional Knowledge Economies and Global Innovation Networks – The Case of Southeast Asia, Journal of Science and Technology Policy Management, Vol. 9, No. 1, 66–86. doi:10.1108/JSTPM-06-2017-0027.
  45. Mughal, N., Arif, A., Jain, V., Chupradit, S., Shabbir, M. S., Ramos-Meza, C. S., and Zhanbayev, R. (2022). The Role of Technological Innovation in Environmental Pollution, Energy Consumption and Sustainable Economic Growth: Evidence from South Asian Economies, Energy Strategy Reviews, Vol. 39, 100745. doi:10.1016/j.esr.2021.100745.
  46. Qamruzzaman, M., and Jianguo, W. (2017). Financial Innovation and Economic Growth in Bangladesh, Financial Innovation, Vol. 3, No. 1, 19. doi:10.1186/s40854-017-0070-0.
  47. Meirun, T., Mihardjo, L. W., Haseeb, M., Khan, S. A. R., and Jermsittiparsert, K. (2021). The Dynamics Effect of Green Technology Innovation on Economic Growth and CO2 Emission in Singapore: New Evidence from Bootstrap ARDL Approach, Environmental Science and Pollution Research, Vol. 28, No. 4, 4184–4194. doi:10.1007/s11356-020-10760-w.
  48. Sulaiman, N. F. C. H. E., Saputra, J., and Muhamad, S. (2021). Effects of Human Capital and Innovation on Economic Growth in Selected ASEAN Countries: Evidence from Panel Regression Approach, The Journal of Asian Finance, Economics and Business (JAFEB), Vol. 8, No. 7, 43–54.
  49. Lv, L., Yin, Y., and Wang, Y. (2020). The Impact of R&D Input on Technological Innovation: Evidence from South Asian and Southeast Asian Countries, Discrete Dynamics in Nature and Society, Vol. 2020, 6408654. doi:10.1155/2020/6408654.
  50. Sultanuzzaman, M. R., Fan, H., Mohamued, E. A., Hossain, M. I., and Islam, M. A. (2019). Effects of Export and Technology on Economic Growth: Selected Emerging Asian Economies, Economic Research-Ekonomska Istraživanja, Vol. 32, No. 1, 2515–2531. doi:10.1080/1331677X.2019.1650656.
  51. International Monetary Fund. (2023). IMF DataMapper, from https://www.imf.org/external/datamapper/datasets.
  52. World Bank. (2023). World Development Indicators, from https://databank.worldbank.org/source/world-development-indicators.
  53. World Intellectual Property Organization. (2023). Global Innovation Index - All Editions, from https://www.wipo.int/global_innovation_index.
  54. Romer, P. M. (1994). The Origins of Endogenous Growth, Journal of Economic Perspectives, Vol. 8, No. 1, 3–22. doi:10.1257/jep.8.1.3.
  55. Chirwa, T. G., and Odhiambo, N. M. (2018). Exogenous and Endogenous Growth Models: A Critical Review, Comparative Economic Research. Central and Eastern Europe, Vol. 21, No. 4, 63–84. doi:10.2478/cer-2018-0027.
  56. Fatás, A. (2000). Endogenous Growth and Stochastic Trends, Journal of Monetary Economics, Vol. 45, No. 1, 107–128. doi:10.1016/S0304-3932(99)00043-4.
  57. Gluzmann, P., and Panigo, D. (2015). Global Search Regression: A New Automatic Model-Selection Technique for Cross-Section, Time-Series, and Panel-Data Regressions, The Stata Journal: Promoting Communications on Statistics and Stata, Vol. 15, No. 2, 325–349. doi:10.1177/1536867X1501500201.
  58. Aşıcı, A. A. (2013). Economic Growth and Its Impact on Environment: A Panel Data Analysis, Ecological Indicators, Vol. 24, 324–333. doi:10.1016/j.ecolind.2012.06.019.
  59. Teixeira, A. A. C., and Queirós, A. S. S. (2016). Economic Growth, Human Capital and Structural Change: A Dynamic Panel Data Analysis, Research Policy, Vol. 45, No. 8, 1636–1648. doi:10.1016/j.respol.2016.04.006.
  60. Inglesi-Lotz, R. (2016). The impact of renewable energy consumption to economic growth: A panel data application, Energy Economics, Vol. 53, 58–63. doi:10.1016/j.eneco.2015.01.003.
  61. El Ghaoui, L., and Lebret, H. (1997). Robust Solutions to Least-Squares Problems with Uncertain Data, SIAM Journal on Matrix Analysis and Applications, Vol. 18, No. 4, 1035–1064. doi:10.1137/S0895479896298130.
  62. McWilliams, B., Krummenacher, G., Lucic, M., and Buhmann, J. M. (2014). Fast and Robust Least Squares Estimation in Corrupted Linear Models, Z. Ghahramani; M. Welling; C. Cortes; N. Lawrence; K. Q. Weinberger (Eds.), Advances in Neural Information Processing Systems (Vol. 27), Curran Associates, Inc.
  63. Gordon, R. (2018). Why Has Economic Growth Slowed When Innovation Appears to be Accelerating?Cambridge, MA. doi:10.3386/w24554.
  64. Hu, A. G. (2015). Innovation and Economic Growth in East Asia: An Overview, Asian Economic Policy Review, Vol. 10, No. 1, 19–37. doi:10.1111/aepr.12078.
  65. Litsareva, E. (2017). Success Factors of Asia-Pacific Fast-Developing Regions’ Technological Innovation Development and Economic Growth, International Journal of Innovation Studies, Vol. 1, No. 1, 72–88. doi:10.3724/SP.J.1440.101006.
  66. Idroes, G. M., Hardi, I., Noviandy, T. R., Sasmita, N. R., Hilal, I. S., Kusumo, F., and Idroes, R. (2023). A Deep Dive into Indonesia’s CO2 Emissions: The Role of Energy Consumption, Economic Growth and Natural Disasters, Ekonomikalia Journal of Economics, Vol. 1, No. 2, 69–81. doi:10.60084/eje.v1i2.115.
  67. Nurmalia, Hartono, D., and Muzayanah, I. F. U. (2020). The Roles of Entrepreneurship on Regional Economic Growth in Indonesia, Journal of the Knowledge Economy, Vol. 11, No. 1, 28–41. doi:10.1007/s13132-018-0557-6.
  68. Busroh, F. F. (2018). Assessing the Role of IPR Legislations for Technology, Innovation and Economic Growth in Indonesia, Int. J. Manag. Bus. Res, Vol. 8, No. 3, 227–236.
  69. Aritenang, A. F. (2021). The Importance of Agglomeration Economies and Technological Level on Local Economic Growth: The Case of Indonesia, Journal of the Knowledge Economy, Vol. 12, No. 2, 544–563. doi:10.1007/s13132-021-00735-8.
  70. DamuRi, Y. R., Aswicahyono, H., and Christian, D. (2018). Innovation Policy in Indonesia, M. Ambashi, Innovation Policy in ASEAN, 96–127.
  71. Widarni, E. L., and Bawono, S. (2021). Human Capital, Technology, and Economic Growth: A Case Study of Indonesia, The Journal of Asian Finance, Economics and Business (JAFEB), Vol. 8, No. 5, 29–35.
  72. Hardi, I., Idroes, G. M., Zulham, T., Suriani, S., and Saputra, J. (2023). Economic Growth, Agriculture, Capital Formation and Greenhouse Gas Emissions in Indonesia: FMOLS, DOLS and CCR Applications, Ekonomikalia Journal of Economics, Vol. 1, No. 2, 82–91. doi:10.60084/eje.v1i2.109.
  73. Maulidar, P., Fitriyani, F., Sasmita, N. R., Hardi, I., and Idroes, G. M. (2024). Exploring Indonesia’s CO2 Emissions: The Impact of Agriculture, Economic Growth, Capital and Labor, Grimsa Journal of Business and Economics Studies, Vol. 1, No. 1, 43–55. doi:10.61975/gjbes.v1i1.22.
  74. Intarakumnerd, P., Chairatana, P., and Tangchitpiboon, T. (2002). National Innovation System in Less Successful Developing Countries: The Case of Thailand, Research Policy, Vol. 31, Nos. 8–9, 1445–1457. doi:10.1016/S0048-7333(02)00074-4.
  75. Iamratanakul, S. (2014). A Framework of the Innovation System: A Case of Thailand, International Journal of Economic Policy in Emerging Economies, Vol. 7, No. 2, 111. doi:10.1504/IJEPEE.2014.063187.
  76. Joseph, K. J. (2006). Thailand: From Investment-led Growth to Innovation-led Growth, Information Technology, Innovation System and Trade Regime in Developing Countries, Palgrave Macmillan UK, London, 53–85. doi:10.1057/9780230626331_3.
  77. Bellows, T. J. (2006). Economic Challenges and Political Innovation: The Case of Singapore, Asian Affairs: An American Review, Vol. 32, No. 4, 231–255. doi:10.3200/AAFS.32.4.231-255.
  78. Chew, S. B., and Chew, R. (2003). Promoting Innovation in Singapore: Changing the Mindset, International Journal of Entrepreneurship and Innovation Management, Vol. 3, No. 3, 249. doi:10.1504/IJEIM.2003.003284.
  79. Robinson, E. (2018). Globalisation in a Small Open Economy: The Singapore Experience, BIS Papers Chapters, Vol. 100, 321–329.
  80. Rasiah, R., and Yap, X.-S. (2015). Innovation Performance of the Malaysian Economy, The Global Innovation Index, Vol. 139.
  81. Law, S. H., Sarmidi, T., and Goh, L. T. (2020). Impact of Innovation on Economic Growth: Evidence From Malaysia, Malaysian Journal of Economic Studies, Vol. 57, No. 1, 113–132.
  82. Akoum, I. (2016). Research, Development and Innovation in Malaysia: Elements of an Effective Growth Model, Asian Economic and Financial Review, Vol. 6, No. 7, 390.
  83. Bekhet, H. A., and Latif, N. W. A. (2017). Highlighting Innovation Policies and Sustainable Growth in Malaysia, International Journal of Innovation, Management and Technology, Vol. 8, No. 3, 228–239.
  84. Nguyen Van Hiep, P. N. T. (2021). The Role of Science and Technology in Growth Model Innovation in Vietnam (2010–2020), Journal of Hunan University Natural Sciences, Vol. 48, No. 1.
  85. Mazyrin, V. M. (2013). Economic Modernization in Vietnam From Industrialization to Innovation Stage, VNU Journal of Economics And Business; Vol 29 No 2.
  86. Nguyen, M. H. (2020). Domestic Innovation Activities and Economic Development in Vietnam, VNUHCM Journal of Economics, Business and Law, Vol. 4, No. 4, 1069–1080.

Downloads

Published

2024-02-22

How to Cite

Hardi, I., Ray, S., Attari, M. U. Q., Ali, N. and Idroes, G. M. (2024) “Innovation and Economic Growth in the Top Five Southeast Asian Economies: A Decomposition Analysis”, Ekonomikalia Journal of Economics, 2(1), pp. 1–14. doi: 10.60084/eje.v2i1.145.

Issue

Section

Articles