Оценка влияния прямых иностранных инвестиций и открытости торговли на инновации в странах БРИКС / Assessing the effect of foreign direct investments and trade openness on innovation within BRICS countries
Аннотация
The modern world is characterized by rapid development, digitalization, and globalization. The country's economic growth and prosperity largely depend on innovation and the ability to apply new technologies. In this context, the BRICS countries (Brazil, Russia, India, China, and South Africa) are of particular importance, as they are important drivers of global economic growth and have great potential for developing innovations and attracting foreign investment. This work is devoted to the study of the impact of international trade indicators on the innovative development of the BRICS countries.
The relevance of this topic is due to the fact that BRICS countries are becoming more important players in the global economy and leading developing countries, but at the same time lagging behind the rest of the world, especially developed countries. Understanding the mechanisms of innovation development in these countries represents significant scientific and practical interest, as innovations are one of the main factors of economic growth and improvement of the quality of life. In addition, studying the relationship between innovation, foreign direct investment, and trade openness becomes particularly relevant in the context of globalization and intensification of international cooperation.
The topic of innovation is widely studied in the economic literature. Many authors have investigated various aspects of this phenomenon. However, there are very few studies devoted to exploration of the impact of international trade on innovation. In particular, we can observe the absence of works devoted to developing countries, specifically the BRICS countries. This work is intended to fill this gap in the literature.
The purpose of this study is to assess the impact of foreign direct investment and trade openness on innovation in the BRICS countries. To achieve it, it is necessary to set and solve several tasks:
- to review and analyze the context of the study, namely the BRICS countries;
- to conduct a comprehensive review of innovation as a phenomenon;
- to consider the theoretical foundations of foreign direct investment and trade openness;
- to consider how innovations can affect various aspects of sustainable development;
- to conduct an empirical analysis of the impact of FDI and trade openness on innovation;
- to describe the results obtained and offer recommendations for regulators and businesses.
The object of this study is the interaction of macroeconomic indicators of the BRICS countries. The subject of the study is the impact of foreign direct investment and trade openness on the innovation in the BRICS countries.
The methodological tools of the study include empirical analysis based on data analysis using the construction of an econometric model and its evaluation. Since the data under consideration has a panel structure, the thesis uses approaches that take into account the panel nature of the data distribution, as well as an instrumental approach that allows working with endogeneity.
This research contributes to a better understanding of the factors driving innovation in emerging market countries, and can also help both policy makers and businesses make better informed decisions about how to promote innovation and economic growth in the BRICS countries and other developing countries.
The study was carried out using available monographic and periodical literature on the designated topic, the main data sources are the official websites of the World Bank and agencies calculating various indices.
The main results of the study are the revealed relationships between the dependent variable and the independent ones. It was found that FDI, human capital, financial development, and per capita income do not have a significant impact on innovation, while trade openness, institutional quality, and R&D expenditures positively affect innovation.
The finding that FDI has an insignificant impact on innovation in BRICS countries could be attributed to the fact that most FDI in these countries is directed towards the exploitation of natural resources, labor-intensive industries, and other sectors with limited scope for technological innovation. Additionally, FDI may not necessarily lead to knowledge spillovers or the transfer of technology, especially if foreign firms establish isolated operations with little interaction with local firms. To improve the impact of FDI on innovation, regulators and businesses should promote FDI in high-tech sectors, such as information and communication technology, biotechnology, and renewable energy. This could help enhance the technological capabilities and competitiveness of domestic firms. They should also strengthen intellectual property rights protection to encourage domestic and foreign firms to invest in innovation.
The positive impact of trade openness on innovation can be related to increased competition, access to new technologies, and knowledge spillovers that result from greater exposure to international markets. Openness to trade can also lead to the diffusion of best practices and management techniques, which can enhance a firm’s capacity to innovate. To further benefit from trade openness, regulators and businesses should improve the quality and standards of their products and services, which can increase their market share and reputation in global markets. They should also invest in human capital to develop a skilled workforce capable of driving innovation.
The negative impact of corruption on innovation can be attributed to the fact that corruption creates an unfavorable business environment, distorts market competition, and diverts resources away from productive investments. Firms operating in corrupt environments may be less likely to invest in R&D and innovation since they cannot be sure that their investments will yield returns, especially if corruption hinders access to permits, licenses, or other necessary approvals. To reduce the negative effects of corruption on innovation, regulators and businesses should combat corruption by improving transparency, implementing effective anti-corruption laws, and promoting good governance. This would create even more conducive environment for innovation.
There is a positive impact of R&D expenditures on innovation, since R&D is an important contribution to the generation of new knowledge and technologies. R&D spending provides financing for the development of new technologies, products or services, helps companies to remain competitive in their markets, allowing them to introduce new and improved products, services or processes that can increase efficiency and reduce costs.
The relevance of this topic is due to the fact that BRICS countries are becoming more important players in the global economy and leading developing countries, but at the same time lagging behind the rest of the world, especially developed countries. Understanding the mechanisms of innovation development in these countries represents significant scientific and practical interest, as innovations are one of the main factors of economic growth and improvement of the quality of life. In addition, studying the relationship between innovation, foreign direct investment, and trade openness becomes particularly relevant in the context of globalization and intensification of international cooperation.
The topic of innovation is widely studied in the economic literature. Many authors have investigated various aspects of this phenomenon. However, there are very few studies devoted to exploration of the impact of international trade on innovation. In particular, we can observe the absence of works devoted to developing countries, specifically the BRICS countries. This work is intended to fill this gap in the literature.
The purpose of this study is to assess the impact of foreign direct investment and trade openness on innovation in the BRICS countries. To achieve it, it is necessary to set and solve several tasks:
- to review and analyze the context of the study, namely the BRICS countries;
- to conduct a comprehensive review of innovation as a phenomenon;
- to consider the theoretical foundations of foreign direct investment and trade openness;
- to consider how innovations can affect various aspects of sustainable development;
- to conduct an empirical analysis of the impact of FDI and trade openness on innovation;
- to describe the results obtained and offer recommendations for regulators and businesses.
The object of this study is the interaction of macroeconomic indicators of the BRICS countries. The subject of the study is the impact of foreign direct investment and trade openness on the innovation in the BRICS countries.
The methodological tools of the study include empirical analysis based on data analysis using the construction of an econometric model and its evaluation. Since the data under consideration has a panel structure, the thesis uses approaches that take into account the panel nature of the data distribution, as well as an instrumental approach that allows working with endogeneity.
This research contributes to a better understanding of the factors driving innovation in emerging market countries, and can also help both policy makers and businesses make better informed decisions about how to promote innovation and economic growth in the BRICS countries and other developing countries.
The study was carried out using available monographic and periodical literature on the designated topic, the main data sources are the official websites of the World Bank and agencies calculating various indices.
The main results of the study are the revealed relationships between the dependent variable and the independent ones. It was found that FDI, human capital, financial development, and per capita income do not have a significant impact on innovation, while trade openness, institutional quality, and R&D expenditures positively affect innovation.
The finding that FDI has an insignificant impact on innovation in BRICS countries could be attributed to the fact that most FDI in these countries is directed towards the exploitation of natural resources, labor-intensive industries, and other sectors with limited scope for technological innovation. Additionally, FDI may not necessarily lead to knowledge spillovers or the transfer of technology, especially if foreign firms establish isolated operations with little interaction with local firms. To improve the impact of FDI on innovation, regulators and businesses should promote FDI in high-tech sectors, such as information and communication technology, biotechnology, and renewable energy. This could help enhance the technological capabilities and competitiveness of domestic firms. They should also strengthen intellectual property rights protection to encourage domestic and foreign firms to invest in innovation.
The positive impact of trade openness on innovation can be related to increased competition, access to new technologies, and knowledge spillovers that result from greater exposure to international markets. Openness to trade can also lead to the diffusion of best practices and management techniques, which can enhance a firm’s capacity to innovate. To further benefit from trade openness, regulators and businesses should improve the quality and standards of their products and services, which can increase their market share and reputation in global markets. They should also invest in human capital to develop a skilled workforce capable of driving innovation.
The negative impact of corruption on innovation can be attributed to the fact that corruption creates an unfavorable business environment, distorts market competition, and diverts resources away from productive investments. Firms operating in corrupt environments may be less likely to invest in R&D and innovation since they cannot be sure that their investments will yield returns, especially if corruption hinders access to permits, licenses, or other necessary approvals. To reduce the negative effects of corruption on innovation, regulators and businesses should combat corruption by improving transparency, implementing effective anti-corruption laws, and promoting good governance. This would create even more conducive environment for innovation.
There is a positive impact of R&D expenditures on innovation, since R&D is an important contribution to the generation of new knowledge and technologies. R&D spending provides financing for the development of new technologies, products or services, helps companies to remain competitive in their markets, allowing them to introduce new and improved products, services or processes that can increase efficiency and reduce costs.