From resource curse to green transformation: innovation failures and the role of AI and digital twins in MENA economies

This study investigates the structural constraints affecting the transition toward a knowledge-based economy in 19 MENA countries over the period 1990–2022. Using a dynamic panel approach based on a two-step System GMM estimator, the analysis reveals a notable paradox: while innovation outputs, proxied by patent applications, have a positive and significant effect on economic growth, human capital exhibits a negative association, and R&D expenditure remains statistically insignificant. These findings point to structural inefficiencies in the innovation system, where investments in knowledge do not translate effectively into productive and sustainable outcomes. The results further highlight regional heterogeneity: the innovation–growth relationship appears stronger in diversified and institutionally stable economies, but weaker in resource-dependent contexts, suggesting a form of resource-related constraint on innovation dynamics. Building on this empirical diagnosis, the study argues that existing development models remain largely input-driven and insufficiently aligned with the requirements of a green and knowledge-based economy. It proposes that emerging digital technologies—particularly Artificial Intelligence (AI) and Digital Twins—can support this transition by improving resource allocation, strengthening coordination mechanisms, and enabling the simulation of policy and investment scenarios. Overall, the paper contributes to the literature by linking innovation dynamics to sustainability challenges in MENA and by outlining a technology-enabled pathway toward more resilient and inclusive growth.