4. Empirical result
4.3 The result of national R&D efficiency
After exploring the governance indexes, this study further classifies efficiency scores into two groups and five regions which reported on table 9. On the top part of the table, the efficiency scores of OECD members are much larger than non-OECD members. For each groups, the average efficiency scores are 0.7456 and 0.4973 separately. In Figure 2, the difference between two groups in 1998 is slightly lower than 0.2. Except for first year, all differences between OECD and non-OECD members are between 0.2148 and 0.2758. The average difference during the period is 0.2483.
Table 9
National R&D efficiency across groups and regions
1998 2000 2002 2003 2004 2005 2006 2007 2008 Ave.
Groups
OECD 0.7541 0.7565 0.7526 0.7212 0.7424 0.7413 0.7486 0.7559 0.7375 0.7456 Non-OECD 0.5590 0.4953 0.5130 0.4943 0.4781 0.4654 0.4737 0.4738 0.5227 0.4973 Regions
Africa -- 0.3905 0.2671 0.3136 0.2818 0.3683 0.1633 0.4390 -- 0.3177 America 0.7038 0.6793 0.6599 0.6025 0.5536 0.5884 0.5970 0.6148 0.6169 0.6240 Asia 0.6067 0.5891 0.5857 0.5363 0.5965 0.5381 0.6254 0.5234 0.6224 0.5804 Europe 0.6998 0.6968 0.6975 0.6685 0.6785 0.6730 0.6623 0.6770 0.6575 0.6790 Oceania 0.9145 0.8995 0.8239 0.9347 0.8285 0.9328 0.8149 0.9267 0.8109 0.8763 Notes: Because of unbalanced panel data, there are two missing values in Africa.
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Figure 2 Gaps in average efficiency score between OECD and Non-OECD members
From a regional perspective, it can be observed that Oceania gets the highest efficiency score and Africa gets the lowest one whose averages are 0.8763 and 0.3177 respectively.
Europe and America particularly have not too much different on average efficiency scores and Asia's average efficiency score is a bit lower than the two regions. The gap in average efficiency score between Europe and America is only 0.055. For the last five years, the gaps are decreasing from 0.1249 to 0.0407, and the figure of decreasing tendency is shown below.
Figure 3 Gaps in average efficiency score between Europe and America
0.0000 0.0500 0.1000 0.1500 0.2000 0.2500 0.3000
1998 2000 2002 2003 2004 2005 2006 2007 2008
(gap)
gap
0.00 0.02 0.04 0.06 0.08 0.10 0.12 0.14
2004 2005 2006 2007 2008
(gap)
(year)
gap
28
From each countries point of view, the efficiency scores and total ranks are shown in table 10. Ranking by scores, Chile, Ireland, and New Zealand are the top three countries in all of 59 countries. All their efficiency scores are above 0.93. Contrary to those countries, Philippines, Ukraine and Morocco are the last three countries. All their efficiency scores are below 0.22.
The average difference of the efficiency score between top and last three countries is up to 0.79.
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Table 10
National R&D efficiency and ranking
Nations Mean Rank Nations Mean Rank
Notes: The observation periods are 1998, 2000, 2002–2008 and the scores are estimated from Table 8.
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Figures 3 to 6 post the comparison between top and last three countries, and all nations' mean for six governance indexes. Exploring the top and last three countries' governance indexes, Chile, Ireland and New Zealand are much higher than total mean4 , but Philippines, Ukraine and Morocco are completely not the case. The results show no exceptions among the six indexes. On average, we observe that nations with better governance also get higher efficiency scores.
Figure 4 Governance index of VA Figure 5 Governance index of PS
Figure 6 Governance index of GE Figure 7 Governance index of RQ
4 Table 3 shows the descriptive statistics of total mean calculated from 59 countries.
-1.00
Political Stability and Absence of Violence
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Figure 8 Governance index of RL Figure 9 Governance index of CO
From Models 1 to 6, we observe that six governance indexes increase national R&D efficiency. Taking governance indexes into account, we further find the countries which got high R&D efficiency scores also have high governance indexes. The results indicate the importance of public governance. And the results also manifest that it is essential to improve countries' public governance if they get lower R&D efficiency scores.
-1.00 -0.50 0.00 0.50 1.00 1.50 2.00
Rule of Law
-1.00 -0.50 0.00 0.50 1.00 1.50 2.00 2.50
Control of Corruption
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5. Conclusions and policy implications
Numerous studies had showed that R&D efficiency indeed improved the economic growth.
In viewing of this, finding the factors which can promote R&D efficiency become a critical issue. Concerning the public governance, so far, most of prior studies focused on single policy.
However, public governance contains many aspects. It may give the partial views if we just exam the single policy. Therefore, this study aims at government administration and uses six governance indicators developed by Kaufman et al. (2010), providing a comprehensive analysis between the public governance and national R&D efficiency.
This study adopts SFA approach and one-step model, estimating the parameters of distance function and efficiency function simultaneously. Through LR test, we show that translog specification is more suitable than Cobb-Douglas function form. Through Kruskal–Wallis test, we provide the evidence that there is no difference if we regard any of the three outputs as yntH.
The empirical results show that six governance indexes all have positive influences on R&D efficiency. In the dimension of ‘selection of the authority’, VA and PS increase the R&D efficiency. VA mainly measures the level of economic freedom and democracy. If economic policies which include fiscal, taxation, exchange rate are transparent enough, investor will increase the motive on R&D activities because of the friendly aggregate environment. Democracy and science are mutually reinforcing. Science can survive only if it is free economy. It will not only add creativity but the imagination of democracy (Shiv, 1998).
For PS, if political situation is stable enough, the staffs who want to dedicate to R&D activities could face fewer future uncertainties which result from political turbulence. It is also the cause that staffs will take PS into consideration when doing the R&D activities.
‘Government action’ which contains GE and RQ will all increase the R&D efficiency.
Besides, GE especially plays the most important role among the six indexes. This suggests
33
that putting emphasis on the quality of public services, the quality of civil services, and the credibility of government's commitment will increase much more R&D efficiency. In order to improve R&D efficiency, this result give a direction that we can pay more attention on GE.
For RQ, according to the definition, to enhance regulatory quality is beneficial to the development of private sector. If private sector is prosperous, it will trigger R&D activities much easily.
The last dimension, ‘respect for institutional framework’. Including RL and CO, increases the R&D efficiency likewise. If countries have a sound judicial system, it will help the interaction of social and economic. And the interaction is under people's trust and obedience to the social rules. A sound judicial also covers the laws related to R&D. Under the protection of the laws, it can encourage more staffs to do R&D activities. For CO, as above mentioned, control of corruption positively related to foreign direct investment. Considering the effect of knowledge spillover, from our empirical results, if the corruption is better controlled, it can induce more R&D efficiency. The result is consistent with the statement that corrupt is not beneficial to innovation (Mareco, 2008).
Observing nations' efficiency scores by groups, OECD members are quite higher than Non-OECD members. Classifying countries into five regions, Oceania get the highest score and Africa gets the lowest one. Europe and America get almost the same scores whose average difference is only 0.055. Asia gets fourth place among five regions whose efficiency score is 0.5804.
Comparing efficiency scores by nations, Chile, Ireland, and New Zealand are the top three countries that the efficiency scores are above 0.93. However, Philippines, Ukraine and Morocco are the last three countries that the efficiency scores are below 0.22. We further observe that top three countries' governance indexes are appreciably higher than total mean;
nevertheless, the last three countries' indexes are all lower than total mean. It infers that good governance will have positive effects on national R&D efficiency. And it conveys the same
34
concept to the results of models 1 to 6, highlighting the importance of public governance once again.
For an effective promotion of democracy, socio-economic development must be a central component (Julian and Franziska, 2009). In the socio-economic development, R&D activities are prerequisites in the era of competition and globalization. Through innovation, nations could unceasingly create new values which lead to economic growth. To increase the R&D efficiency, government should improve the public governance. Each index that mentioned in this study are the right direction to work for. Government should make a self-examination whether there is still room for improvement from every aspects. The government effectiveness is the most important factor in this study. For improving R&D efficiency, it is worth spending more attention on GE.
At the empirical level, we propose some aspects for future research. First, this study estimates the R&D efficiency and governance indexes from the view point of overall nations.
It should be interesting to take deeply analysis by individual countries. As a result, policymakers could further understand the weaknesses through the comparison of each nation.
Second, utilizing unbalanced panel data, this study collects 59 countries. In fact, some regions just include few nations. For example, Oceania includes two nations and Africa includes five nations. Complete analysis will be shown by adding more nations. Third, the inputs and outputs are dynamic process. It means the first year's inputs may not exactly reflect in the first year's outputs. If future studies could take objective time lag into consideration, the results will be closer to reality.
35
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