This paper examines three empirical predictions of the Schumpeterian endogenous growth theory (1) the positive relation between innovation and growth rate, (2) the inverted U-shape relationship between competition and innovation, and (3) the positive effect of industry R&D spread on R&D investment. I examine the case of 10 Post-Soviet countries over the period 1996-2016. My analysis considers both aggregate and firm-level data while using a panel data methodology with fixed effects approach. My findings provide evidence of a positive relation of R&D investment, a measure of innovation, with growth. Meanwhile, there also appears to be a "stepping on toes" effect on growth with the R&D share, a measure of innovation commonly used in the theoretical literature. I find no evidence of an inverted-U relation at the industry-level. Instead, I find a positive relation between the industry spread of R&D investment and the firm's own investment. This finding suggests catching-up decisions by laggard firms and continued investment by lead firms.
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Thesis advisor: Aragon, Fernando
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