The determinants of innovation: an empirical analysis in Egypt, Jordan, Syria and Turkey

Abstract

In this study, we analyse the determinants of innovation in four southern Mediterranean countries, Egypt, Jordan, Syria and Turkey, using firm-level data from the World Bank Investment Climate Survey. Starting with evidence from other developing countries, we investigate the various internal and external factors influencing the decision to innovate. Despite some divergences between the four countries, there are several common characteristics, especially with regard to the drivers of and hurdles to innovation. On the one hand, our results highlight the importance of knowledge creation and learning as instruments, first to improve the absorptive capacity of a firm and subsequently to enhance its propensity to innovate. On the other hand, they underline the limited direct and indirect effects on innovation of foreign partnership and exports. These findings indicate the need for a deeper investigation into the role of trade liberalisation and capital openness in the southern Mediterranean region.

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