Financial and investment indicators for accelerating innovation development: Comparison of GII leaders and Ukraine

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The purpose of the paper is to determine the causal relationship between financial and investment indicators and the level of innovation development in GII leading countries and Ukraine. For a sample of 10 leaders in GII-2022 and Ukraine for 2011–2020, a correlation analysis was conducted based on the following indicators: the value of GII, foreign direct investment (net inflows), domestic credit to the private sector, ease of getting credit, protecting minority investors, and real interest rate. A positive relationship (with moderate/high strength) between innovation development and foreign direct investment has been proven in 7 out of 11 countries with a time lag of 0-2 years; domestic credit to the private sector – in 6 countries (lag of 0-3 years); and protecting minority investors – in 9 countries (lag of 0-2 years). For other indicators, the relationship is negative. Through VAR-modelling and Granger test, it is proven that the change in the value of foreign direct investment causes the change in the value of GII in 6 countries (bidirectional causality exists only in Ukraine); domestic credit to the private sector – in 6 countries, protecting minority investors and real interest rate – in 2 countries, and ease of getting credit – only in Switzerland. The results show that foreign direct investment and domestic credit to the private sector are the reasons for increasing the level of innovation development and have potentially the highest influence. In Ukraine, compared to GII leaders, only the factor of foreign direct investment is identified as a cause of innovation development.

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    • Figure 1. Comparison of the overall GII score and scores of Credit and Investment sub-pillars of GII for 10 top countries in GII and Ukraine in 2022
    • Table 1. Results of the Shapiro-Wilk test for normal data
    • Table 2. Correlation analysis results confirming the existence of relationships between innovation development and certain financial indicators
    • Table 3. VAR modelling on the example of the first country from the sample (Switzerland)
    • Table 4. Granger test using the example of the first country in the sample (Switzerland)
    • Table 5. General results of the Granger test to determine the causality relationships between certain indicators of a country’s financial policy and the level of its innovation development
    • Conceptualization
      Olena Dobrovolska, Ralph Sonntag
    • Data curation
      Olena Dobrovolska, Olha Hubaryk, Tetіana Savanchuk
    • Investigation
      Olena Dobrovolska, Tetіana Savanchuk
    • Methodology
      Olena Dobrovolska, Svitlana Kachula
    • Supervision
      Olena Dobrovolska, Olha Hubaryk
    • Validation
      Olena Dobrovolska, Tetіana Savanchuk
    • Writing – original draft
      Olena Dobrovolska, Olha Hubaryk, Tetіana Savanchuk
    • Writing – review & editing
      Olena Dobrovolska, Ralph Sonntag, Svitlana Kachula, Olha Hubaryk, Tetіana Savanchuk
    • Formal Analysis
      Ralph Sonntag, Olha Hubaryk
    • Project administration
      Ralph Sonntag, Svitlana Kachula
    • Visualization
      Svitlana Kachula, Olha Hubaryk, Tetіana Savanchuk