Does corruption impede innovation in developing economies? Insights from Pakistan: a call for policies reforms

Abstract

Innovation as an essential index of economic development facilitates economies to enhance their productivity levels and domestic outputs over the long run. The innovation level of a country depends heavily on its strong institutional settings, quality of education, and peaceful environment. Contrastingly, weak institutional capacity, corruption, inadequacy in education and terrorism can affect the pace of innovation. Applying the ARDL approach to cointegration, this study aims to investigate the short- and long-run impacts of corruption, human capital, and terrorism upon innovation in Pakistan. The findings revealed that corruption, inadequecy in education, and terrorism all have adverse effects on innovation. The adverse effect of corruption was found to be worse than those of inadequecy in education and terrorism. Several econometric approaches provide further support to the main results. Our findings recommends significant policies reforms in Pakistan. Detailed policy implications are also discussed.