INNOVATIVE ACTIVITY AND BUSINESS CYCLE: AUSTRIA IN THE 19TH AND 20TH CENTURY
The period of economic recession and crisis usually intensiﬁes the discussion of policies that aim to increase economic performance. Among these we often ﬁnd suggestions to increase support of research and development, entrepreneurship and innovations. Economic crises create certain pressures to search for adequate policies in this respect; at the same time, crises seem to be the appropriate periods for implementing new policies. However, the research of the relation between business cycles and innovative activities is still rather marginal.
Jméno a příjmení autora:
Pavol Minárik, Marek Vokoun, František Stellner
Business cycle, innovation, innovative activity, Austria
DOI (& full text):
This paper focuses on the analysis of the relationship between business cycles and innovative activity in a small open economy. Small economies beneﬁt from imports of foreign technologies through…více
This paper focuses on the analysis of the relationship between business cycles and innovative activity in a small open economy. Small economies beneﬁt from imports of foreign technologies through international trade and foreign investments and are subjects to signiﬁcant exogenous shocks that impact their business cycle. The economic analysis is based on the demand and supply theories of innovation and economic ﬂuctuations. Hypotheses about long term and short term (Granger) effects are tested on Austrian historical data (1852-1979) about the economic output (gross domestic product and industry production) and innovation output (granted patents). The econometric analysis utilizes vector error correction procedure to estimate time-series models of the economy. The results are interpreted in Austrian historical context. The economic-historical analysis suggests that there is no long-term relationship between business cycles and innovative activity between 1852 and 1937. The long-term relationship manifested only between 1948 and 1979. This relationship is very complex and inﬂuenced by the historical context, and it is not easy to grasp by the econometric analysis. In the short run, there is no compelling evidence trough-out the analyzed time period (1852-1979). However, we cannot fully reject the hypothesis suggesting a relationship between economic cycles and innovative activities. In the most recent period (1948-1979), we can observe a negative impact (Granger causality) of granted patents on the real GDP. Future research taking into account more countries using parametric as well as non-parametric approach could shed some light on the demand hypothesis in the pre-war and post-war development of small open economies. This paper showed that there is a long-term equilibrium between economic output and innovation activity. This result suggests that long term factors such as political stability are behind the complex relationship.