Analysis of the Impact of Industrial Exposure and Exogenous Shocks on Countries’ Innovation Index Using the Bartik Instrument
Keywords:
Industrial exposure, innovation, Bartik Instrument, panel data, human capital, upper-middle-income countriesAbstract
This study examines the impact of industrial exposure and exogenous shocks on the innovation index. The main objective of the research is to analyze the effects of industrial transformations and the growth of national and global industries on countries’ innovation performance using the Bartik Instrument. The research variables include the innovation index, the share of primary industries, industry growth, and economic and institutional control variables for selected upper-middle-income countries during the period 2015–2023. The model estimation method is based on two-stage least squares (2SLS) panel data analysis using the Bartik Instrument, with control variables including GDP per capita, human capital, research and development expenditures, technological infrastructure, and institutional indicators. The findings indicate that greater industrial exposure, accompanied by the growth of key industries, has a positive and significant effect on the innovation index, such that countries with a higher share of growing industries have experienced higher levels of innovation. Other control variables also yield notable results; in particular, human capital and technological infrastructure amplify the effect of industrial exposure on innovation. The results further suggest that a targeted policy mix involving key industries, human capital, and technology can substantially enhance national innovation capacity in upper-middle-income countries.
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Copyright (c) 2025 Khitam Hatem Hammood Alowaidi (Author); Sara Ghobadi; Jawad Kadhim Abed Al-bakri, Hossein Sharifi Renani (Author)
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