The Truth about the Role of the Government in Promoting Innovative Growth in Developing Countries – An Empirical Analysis Based on the Experiences of New EU Members

The smart growth strategy has gained considerable attention recently. Governments all over the world are trying to reform their countries to increase the level of innovation and spur growth following this strategy. Despite the recent popularity of this theory, it is less clear whether the governments in developing countries are able to achieve these goals. The political literature claims that many of the necessary reforms might go against the interests of various parties. Our results are consistent with this view. These results show that only reforms that do not endanger officials' interests are efficient in spurring innovation in a country. Thus, the education sector seems to be the best driver of R&D development in developing countries. Further, our results suggest that the creation of an institutional R&D infrastructure significantly supports the R&D sector, despite the weak progress of other reforms. The results are robust to various innovation measures and estimation techniques