ABSTRACT
As a component of the institutional environment, rule of law influences innovation that leads to economic growth. The relationship between innovation and rule of law is examined by looking at eleven advanced and ten developing countries. Innovation is assessed using the Global Innovation Index and rule of law is measured using the eight dimensions provided by The World Justice Project. Multiple regression analysis showed that GII can be efficiently explained by only Order and Security for the high group and Open Government for the lower group. Using just these two variables, discriminant analysis indicated that the two groups can be classified 100% correctly. There are significant differences between the high GII countries versus the developing countries along every dimension of rule of law. The governments in the developing countries in this sample need to appreciate the importance of rule of law in achieving higher levels of innovativeness to facilitate economic growth.
Keywords
Innovation, Rule of Law, N11 countries, Institutions, Economic Growth