The Relationship between Innovations and Economic Growth in Sri Lanka

Abstract

Innovation is widely recognized as a major incentive to national economic growth in industrial, newly industrialized, and developing economies (Pavitt and Walker, 1976; Kim, 1980; Archibugi et al., 1991; Ernst and Kim, 2002; Guan and Chen, 2012) and also there is widespread agreement among most economists on the positive link between innovation and growth. The objective of the study is to find out the impact of innovation on economic growth, the long run relationship between economic growth and other economic variables using Augmented Dickey-Fuller (ADF) unit root test and Johansen's test of co-intergration.  The researcher used only secondary data for the study and the conclusion was that innovations positively influence economic growth in Sri Lanka.

Keywords: Innovation, Economic Growth, unit roots, co-integration, vector auto-regression model