The effect of technological innovation on economic growth: Empirical evidence from Kenya

Mohammed, Leila Haroon
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Strathmore University
Kenya's recent classification as a Lower- middle-income country (LMIC) is proof that the economy of Kenya is growing as per the Vis on 2030 Plan set in 2008. As technological innovation development is a known factor for increasing the growth of a nation's economy, Kenya's objective to transition into a knowledge-based economy requires a proper understanding of the relationship between technological innovation, that produces technological knowledge, and economic growth. This study puts technological innovation into perspective and aims to empirically examine its relationship to economic growth. It employs the use of Patent registered, Number of trademarks registered in Kenya, and Scientific and Teclmical Journal articles in Kenya as measures of technological innovation as well as Labour productivity Growth rate as a proxy for economic growth. It establishes whether there exists a long-run relationship between technological innovation and economic growth from 1981 to 2018 with data sourced from The World Bank database. This study also seeks to examine whether there exists bidirectional causality between technological innovation and economic growth. The Autoregressive distributed Lag model and pairwise Granger causality test technique are used for estimation. There is a short run relationship between total number of patent applications and Labour productivity growth rate although the impact is quite small. There is no presence of a significant long run relationship between technological innovation and economic growth. The study also concludes that, there exists no bidirectional granger causality between technological innovation and economic growth.
Submitted in partial fulfillment of the requirements for the Degree of Bachelor of Business Science in Financial Economics at Strathmore University