GREEN INNOVATION AND ECONOMIC COMPETITIVENESS: A PANEL STUDY OF DEVELOPING COUNTRIES

Abstract

Environmental limitations, technological change, and increased need of sustainable production are becoming major factors in global economic competitiveness. The developing nations have the problem of creating economic growth and, at the same time, managing environmental pressures that erode the traditional sources of competitive advantage. This study explores the influence of green innovation on improving economic competitiveness in developing nations and explores the ways the environmental policy and institutional quality mediate this response. The study estimates the technique through the use of fixed-effects panel regression to manage the unobserved heterogeneity and time-specific shocks with the use of an imbalanced panel data set of about 40–50 developing countries through the period 2005-2022. Several indicators are used in measuring green innovation such as the number of environmental patents, the amount spent on green research and development, and investment on clean technology, and the economic competitiveness is proxied by productivity and export performance. The findings demonstrate that there is a positive and statistically significant correlation between green innovation and economic competitiveness that mean that environmentally oriented innovation leads to productivity increase and competitive enhancing. Long-term models demonstrate that this relationship is greatly reinforced by the environmental policy stringency and the institutional quality which implies that conducive regulatory frameworks and effective governance augmentation increase the economic payoffs of green innovation. Robustness tests ensure that the results are stable when using different measures and model specifications. Policy wise the findings highlight the necessity to combine green innovation and environmental regulation and institutional reform in order to attain sustainable and resilient economic growth.