Uncertainty and technological innovation: evidence from developed and developing countries

Abstract

Uncertainty will not only harm the economy but may also provide an opportunity for technological innovation. It is well established from past studies that technological innovation is a useful tool for reducing uncertainty across countries. However, it is not known whether this uncertainty can contribute to innovation across countries. Hence, in this study, we develop an empirical model to examine the impact of uncertainty on technological innovation across a global panel of both developed and developing countries over the period 2013–2018. Using generalized methods of moment (GMM), we find that uncertainty have significant negative and positive impact on technological innovation in developing and developed countries, respectively. Given these findings, the study argues that the role of uncertainty in improving technological innovation significantly varies across both developed and developing countries. Therefore, significant implications have to do with the fact that developing countries need to initiate effective action to look uncertainty as a key to unlocking opportunity, while developed countries should take into consideration that uncertainty is a viable strategy for addressing innovation ideas.