ANALYSIS OF THE RELATIONSHIP BETWEEN INNOVATION AND ECONOMIC GROWTH: A STRUCTURAL EQUATION MODELING

Abstract

Innovation is one of the important determinants of economic growth and appears as a key factor in the growth of economies and in sustaining of growth. It is vital for the countries to achieve economic growth and also to make it permanent. Hence, countries putting innovation at the center in economic growth strategies achieved more sustainable growth compared to other countries. These countries are more competitive and thus, in a rapidly changing and developing world, they survive by superiority to their competitors. In that case, innovation is vital for countries. As a result, economic growth is important for countries. Therefore, sustaining growth over the years is one of the most important goals of the countries. One of the way to achieve this goes through doing "innovation".Thus, in this study the effect of innovation on economic growth is analyzed within the framework of "Structural Equation Modeling (SEM)". The aim of the study is to demonstrate the impact of innovation on economic growth with a holistic approach. 127 countries from the "Global Innovation Index (GII) 2017" report was included in this study. As a result of the analysis, it was found that innovation has quite a strong and positive impact on economic growth. This effect was directly realized. This result reveals once again the importance of the innovation factor in economic growth.