This paper offers an empirical examination of the determinants
of a nation’s ability to produce commercially viable innovations,
measured as Patents Granted across a sample of 23 advanced
economies. The approach employed is based on estimating National
Innovative Capacity that focuses on the long-run ability of
economies to produce and/or commercialise innovative technologies,
in the spirit of Furman et al. (2002). The time period of our
analysis covers 1993 to 2005 and employs panel estimation.
Motivated by differences in the rate of innovation between
economies with different economic structures we examine the
Small Open Economies (SOEs) in our country sample to assess
whether there is a significant difference between the determinants
of Innovative Capacity in SOEs and the other larger developed
economies.
We find that advanced SOEs and larger economies do not differ
substantially in their determinants of producing innovative
technologies and, notwithstanding the limitations of Patents as
measures of innovative activity, we conclude that policy choice and
variation plays a key role in determining the productivity of R&D,
when measured as patenting activity.