Institutional quality and economic growth: the mediating role of human capital and innovation within OECD countries

Purpose This study aims to analyze the impact of institutional quality on economic growth along with the mediating role of human capital and innovation among OECD countries based on the new institutional economic and new economic growth theories. Design/methodology/approach The study derived panel data from the Global Innovation Index of the 16 OECD countries (2013–2021) and analyzed through partial least square structural equation modeling. Findings The results have shown that institutional quality positively impacts economic growth among OECD countries, while innovation and human capital mediate the relationship in the defined context. The study also found that the R&D expenditure has positive significant effects on the economics growth, while Gross Capital Formation has nonsignificant effects. Research limitations/implications These useful insights would enable policymakers to formulate and implement more sound regulations among institutions in the light of innovation and human capital to boost economic growth among OECD countries. The findings also direct the policymakers to invest in R&D to enhance the economic growth among OECD countries. Originality/value This study integrates the new institutional economic and new economic growth theories to develop a framework of economic growth for OECD countries. To the best of the authors’ knowledge, although the topics of institutional quality and economic growth have gained a wide attention of academia, this is the first study in these domains.