Innovation-led Governance for Economic Development of Bangladesh

Abstract

A strategic approach to public sector governance, innovation-led governance entails incorporating innovation into larger governance frameworks. Governments can boost innovation in a number of ways, such as investing in new technology or talents, using innovative approaches to governing, and modifying current procedures. Because it enables the conversion of scientific and technological advancements into profitable economic activity, innovation is a critical component of economic progress. This study is developed to examine the relationship between innovation and the economic development of Bangladesh. Financial Innovation, Trade Openness, Human Development Capital, Gross Capital Formation, and Domestic Credit to Private have been taken as an indicator of innovation measure where GDP measures the country’s economic development. Financial Innovation, Trade Openness, Human Development Capital, Gross Capital Formation, and Domestic Credit to Private have been considered independent variables, and GDP as a dependent variable. This study used secondary data for analysis purposes. Secondary data has been collected from different websites (World Bank, World Bank Development Indicators, Bangladesh Bank, Bangladesh Bureau of Statistics). Several tests (Unit root test, Johansen Co-integrating test, Vector Error Correction Model, Impulse Response Function, ARDL, Bound test) are employed for secondary data analysis. All the variables are non-stationary at the level and stationary at the first difference. i.e., I (1). Johansen co-integrating test found that there is a long-term significant relationship between the dependent variable and independent variable. Further, the VECM and impulse response function (innovation accounting) calculate the Speed of Adjustment and find a short-term shock related to GDP. ARDL test and bound test showed that Trade Openness (TO), Human Development Capital (HD), and Gross Capital Formation (GCF) are positively correlated with GDP and negatively correlated with Financial Innovation and Domestic Credit to the Private Sector in the long run. To encourage technical innovation in domestic small enterprises, the Government-led Innovation initiatives (GIPs) are extremely competitive initiatives that give small businesses the chance to participate in Federal Research/Research and Development (R/R&D) with the possibility of commercialization. So, the Government should pay more attention to fostering economic development.