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Sustainable economic growth in the European Union: The role of ICT , venture capital, and innovation
Author(s) -
Pradhan Rudra P.,
Arvin Mak B.,
Nair Mahendhiran,
Bennett Sara E.
Publication year - 2020
Publication title -
review of financial economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.347
H-Index - 41
eISSN - 1873-5924
pISSN - 1058-3300
DOI - 10.1002/rfe.1064
Subject(s) - venture capital , information and communications technology , investment (military) , economics , european union , error correction model , short run , sustainable growth rate , industrial organization , entrepreneurship , diffusion , economic system , business , monetary economics , cointegration , international economics , finance , econometrics , physics , politics , political science , law , thermodynamics
Abstract Over the past 30 years, the economies in Europe have undergone major transformations that have been powered by diffusion of information and communication technology ( ICT ), intensification of innovation, and reforms in the financial sector to support innovative endeavors. The primary objective of this study was to examine the causal relationships among ICT diffusion, innovation diffusion, venture capital investment, and economic growth for 25 countries in Europe for the period from 1989 to 2016. Using a vector error‐correction model, the study examines the underlying short‐run and long‐run relationships for the above variables. The empirical analysis shows that in the long run, venture capital investment, ICT diffusion, and innovation diffusion have significant impacts on economic growth in Europe. However, in the short run, the direction of the causality varies depending on the specific measures of ICT diffusion and innovation diffusion that are utilized. Results from this study provide valuable insights into the types of policies that will contribute to sustainable economic growth in Europe.