Income-dependent variations in innovation performance: Insights from sustainable economic development indicators

Innovation is a cornerstone of economic growth, global competitiveness, and sustainable development. This study analyzes the determinants of global innovation performance (GIP) across lower-middle, upper-middle, and high-income countries using a dynamic panel-data approach with the two-step System Generalized Method of Moments (SGMM), leveraging data from the World Bank and WIPO indices spanning 2010–2021. The findings highlight significant gaps in the factors driving innovation based on income levels. For lower-middle-income countries, human capital, represented by the Human Development Index (HDI), is a pivotal driver, although structural barriers persist. In upper-middle-income countries, historical innovation performance plays a dominant role, while environmental pressures and rapid urbanization hinder progress. High-income countries benefit from economic resources like GDP per capita and adjusted net savings, yet face challenges from urbanization inefficiencies and the complexities of renewable energy deployment. This study contributes to innovation literature by identifying dynamic, income-specific determinants and their interdependencies. The practical and policy implications underscore the need for targeted strategies: fostering human capital in lower-income nations, addressing environmental inefficiencies in middle-income economies, and mitigating urban challenges in high-income countries. The research provides actionable insights for policymakers, academics, and practitioners, advancing the understanding of innovation's multifaceted drivers in diverse economic contexts.