IMPACT OF THE INNOVATIONS ON REGIONAL GROWTH OVER TIME: DYNAMIC ECONOMETRIC MODELING

Technological change leads to the rapid growth of the knowledge-based economy and service industries, allowing those regions to increase their total factor productivity and to become more competitive in the global economy. Innovations are key determinant of regional development but their impact becomes noticeable often over time. For regional policy it is important to understand in what period of time the results of innovative projects can affect on the social and economic indicators. The role played by the innovations in economic growth was recognized and introduced into the neo-classical approach and R&D theories. We used a pooled regression model for panel data to look at the affects of innovations on regional growth over time. The empirical analysis based on a large sample of Russian regions from 2002 to 2014 supports the hypothesis that innovation can impact on economic development in just a few years. The aim of the paper is to reflect the nature of innovation influence on economic growth in the region taking into account time factor. It was determined that influence of patent activity on regional economic growth is positive and statistically significant with lagged value of two years, a share of highly educated employees has positive influence on the rates of economic growth after three years. The findings of the research are useful for policy applications and policy-makers by providing them with a better understanding of the impact of innovation factors of regional growth and length of time needed for the general development.