What question did this study set out to answer?

To explore how government effectiveness influences the relationship between R&D spending and patent output across countries.

February 5, 2026Open Access

Institutional Capacity and the Productivity of R&D: Evidence from Patent Outcomes Across Countries

Key Points

To explore how government effectiveness influences the relationship between R&D spending and patent output across countries.
Analyzed panel data from 111 countries from 2000 to 2020.
Employed two-way fixed effects models and System Generalized Method of Moments estimation.
Measured R&D expenditure as a percentage of GDP two years prior to patent applications.
Assessed government effectiveness using a relevant index from the same two-year window.
R&D investment significantly increases patent activity; a 1% increase in R&D correlates to a 39% increase in patents.
The relationship between R&D and government effectiveness is negative and statistically significant.
Nations with weaker institutions experience greater patent growth during capacity development.
Patenting behavior shows considerable persistence, validating path-dependent innovation processes.

Abstract

Abstract : Innovation is a key driver of economic growth. However, countries with similar research and development spending show very different patent outputs. This raises questions about what makes innovation efficient. This study examines whether government effectiveness affects the relationship between R nations with less robust institutions tend to experience swift patent expansion during periods of capacity building, whereas advanced economies characterized by strong governance increasingly prioritize quality over sheer volume. Dynamic models demonstrate considerable persistence in patenting behavior, as evidenced by a lagged dependent variable coefficient of 0.623, thereby validating path-dependent innovation processes. These observations imply that effective innovation policy requires aligning research investments with institutional capacities and the prevailing developmental context, rather than prioritizing either independently. This research provides empirical support for the influence of governance capacity on national innovation systems.

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