Abstract
Innovation is increasingly recognized as a central catalyst for economic transformation and sustainable development, particularly, within developing countries where structural and institutional challenges often constrain growth. Despite this recognition, the broader developmental implications of innovation remain insufficiently understood. Questions persist about how innovation shapes national resilience to climate change, influences macroeconomic performance, affects environmental quality, and impacts labour market outcomes. Addressing these gaps, this thesis investigates the multidimensional role of innovation across these four interconnected dimensions, using a balanced panel of developing economies spanning 2000–2022 and employing advanced panel econometric techniques.
The first empirical chapter examines the effect of innovation on climate resilience using ND-GAIN's Resilience Index (RI) as a measure for climate resilience. The results show that innovation significantly enhances resilience, particularly in countries with strong renewable energy adoption, sound institutional frameworks, and effective environmental policies.
The second empirical chapter investigates how real exchange rate misalignment influences innovation performance by applying a panel fixed effects approach. Empirical results reveal that real exchange rate misalignment has a significant and negative impact on innovation across all measures. These findings highlight the critical need for sound exchange rate policies and supportive economic environments to enhance innovation and sustainable growth in developing economies.
The third empirical chapter examines the effect of innovation on carbon dioxide emissions, thereby extending the discussion on environmental innovation and sustainability through the application of the Generalized Method of Moments (GMM). The findings reveal a dual and context-specific relationship. Where, innovation promotes emission reduction by encouraging energy-efficient technologies, renewable energy adoption, and cleaner production methods. When technological progress is concentrated in carbon-intensive sectors, short-term emissions may increase as a result of expanded industrial activity and rising energy consumption. Overall, the results suggest that the environmental impact of innovation depends on technological progress and the strength of policy frameworks that incentivize green innovation...