HUMAN CAPITAL AND

ORGANIZATIONAL ASPECTS
OF INNOVATION
INTRODUCTION:

Prosperity can increase if production inputs are employed more intelligently and more effectively
to meet human needs. Innovation is an important driver of productivity development and wealth
generation, particularly during the “fourth industrial revolution”. Innovation is currently a pillar
of Sustainable Development, which encourages governments to "construct resilient
infrastructure, promote balanced and transparent industrialisation and support innovation." SDG
calls on countries, for example, to substantially boost their commercial and public R&D
expenditure. The driving engine of innovation is “Research and Development” (R&D). The
OECD and South America have the highest regional “R&D” intensity, with China and India the
world's innovation centers for the last 10 years. “Middle East and North Africa” (MENA) nations
have endeavored in recent decades to develop their businesses and turn them into a modern
economy. While multiple rounds of structural changes were implemented in different MENA
countries, the economic performance of the area was below its true ability. These are single
sector countries that are susceptible to shocks. Their economic growth was primarily driven by
the generation and export of energy from oil prices and visitors from commodity exporters. The
oil price boom in MENA countries resulted in tremendous economic expansion in the 1970s and
1980s. Countries have made significant investments in striving expansion, education, “ICT and
public health programs” “World Bank, 2016”. Over the last decade, falling oil prices have
affected MENA growth and raised fiscal deficits. Through the move to the information economy,
they began to diversify their economies. You have greatly strengthened your ICT business, but
sadly it has not yet become a robust and stable field of innovation. This article explores the
relation between the GERD-measured opportunities and business strength, expressed in the
2000-2016 MENA area by the actual GDP per capita (GDP). This research is the first to
quantitatively explore this relation in MENA and GERD as an innovation representation in the
context of the endogenous growth pattern. Only six MENA nations – “Egypt, Iran, Kuwait,
Saudi Arabia, Turkey and Tunisia” - have been taken into account to investigate and estimate the
lack of MENA information. In the analysis, Israel and Palestine are not factored. Israel is, as it is
in Korea, the area with the world's greatest R&D of 4,3% of GDP, whereas the MENA countries
make extremely low R&D investment at maximum 1.1% of GDP paid by Turkish in 2015.
(Deutschland, 2018). The situation in Palestine is unpredictable and the GERD values are not
very accurate and dependable.
LITERATURE REVIEW:

The advantage of technological innovation has long been acknowledged as economic success.
Schumpeter (1912, 1939) claimed that due to external aspects of the inventive economic system,
population increase is slow and gradual. Its paradigm of economic growth argues that the
discovery leads through education to competitive and economic success. Solow's exogenous
growth model made this theory more formal (1956). Solow thought research to be endogenous
and that accumulation of knowledge is left out of the paradigm. There are no externalities to the
accumulation of knowledge; all (homogeneous) employees profit from the exogenous
development of technology in proportion to the performance contribution.

The Solow model subsequently grew into a new economic growth theory underlining that
increased productivity is due to rational, commercial innovations in the private sector and is
therefore endogenous. The new postmodernists examined the long-term growth that the technical
breakthroughs resulting from R&D are endogenously selected in the private sector. They also
argued that R&D operations provide information that avoids a decrease in capital output.

In general, the favorable influence of Digital transformation on economic performance is

Blanco et al. (2016) found that R&D had significant, long-term, and beneficial benefits both
inside the private market and on US output and productivity, utilizing standard and dynamic
lower square methods and average group pooling, across 1963 to 2007. at the national level. The
writers have emphasized to the importance of the growth of human capital and R&D investment.
This demands the development of MENA countries' human capital by boosting the quality of
their education system. Furthermore, “Peng” (2010) has demonstrated a very positive and
significant link between expenditure on “research and development” and Chinese economic
growth. In several papers, the correlations between “R&D” and “economic growth” in Turkey
have been favorable yet weak. In unit root and Granger causation analyses, Bektaş et al. (2015)
concluded that there was no long-lasting relation between R&D and economic progress for the
period 1990-2013. The authors attributed that Turkey remains a developing R&D country.

The two-fold positive causality in R&D expenditure in the OECD has been identified nationally,
along with a uniformly positive causality in patent applications for 1996-2011 economic growth,
by Turedi (2016), with the GMM approach claiming Turkey is falling behind in R&D investment
in OECD countries, but R&D has a positive impact on economic growth. Göçer finished the
same thing (2013). The author has found a weaker positive link between R&D expenditure and
infrastructure prosperity than the industrialized countries in the period 1996-2012. The strength
of research and innovation and the correlation between economic growth can be explained by
countries' various R&D resources.

In addition, R&D's favorable impact is not confined to its genesis limitations. In research and
development spanning countries and regions, geographical spillover effects are seen. Wang and
Wu (2015) and Wu (2010) concluded at the national level that R&D had a favorable effect on
China's regional rate of innovation, a beneficial influence on Chinese productivity and economic
growth in turn. Across countries, Lee and Becker's (2017) multivariate co-integration approach
indicates recently that R&D business is a key indicator of bank performance and creator of
Group 20's unique competitive edge, but with varying scales of research and development effects
between countries studied. It is also vital to note that vocational training and IT are positively
linked to country economic performance. Coe et al. (1997) also suggested that development
nations may better profit from the beneficial effect of the export of high-tech costs and new items
from developing countries than R&D investments themselves.

CRITICAL EVALUATION:

The theory of endogenous growth is used to evaluate the relationship between economic
performance and R&D. These ideas explain how knowledge is directly accumulated by human
capital expansion or indirectly through R&D. Romer (1986, 1990) and Grossman and Helpman
(1991), in particular, emphasise that productivity enhancements are driven by a rational actor
which optimizes profits through deliberate innovation. This paper presents five variables to
evaluate the impact of innovation on MENA's economic efficiency: genuine GDP, true R&D
intensity, true gross fixed capital formation, median salaries and gross-school acceptance for six
of 17 countries, namely "Egypt, Iran, Kuwait, Saudi Arabia, Turkey and Tunisia" from 2000 to
2016.

The macroeconomic performance of the countries gauges a constant real GDP of US$2,010. The
entire market value is derived by the value of production in an economy (goods and services).
Real R&D expenditure are the most usually used data on creative activity in a country. The UN
Education, Science and Culture Organization (UNESCO) and several Development Index
databases collect the GDP and GERD.

The model is supplemented by an analysis of the impact of current foreign direct investment on
real GDP. Gross fixed capital output indicates the value of new or existing fixed assets
acquisitions from enterprises, governments and consumers less the value of appropriated fixed
assets (excepting entrepreneurs). In short, gross fixed capital output is part of GDP rather than
human consumption. The usual remuneration for employees aged 15 to 65 is also spent. The
World Bank Index also provides these services. Gross announced is also used to quantify human
capital. This is vital because a country can not think and can not move on research and
development when its intangible assets are low. The database is collected from UNESCO.

Other than "Libya, Syria and Yemen don't receive any R&D statistics," the other sample
numbers of MENA countries are not particularly reliable, whereas the R&D stats of Qatar and
Iraq are not reliable due to capital accumulation and the lack of human capital. The data was
significantly skewed when included "Algeria, Bahrain, Morocco, Oman, Jordan and the UAE",
as the Panel was unable to carry out multiple cross-sectional investigations with the same
conclusions. Moreover, because of their peculiar characteristics in the area, Israel and Palestine
weren't included in the research.

Modified Wald statistics show that the FE model has a heteroscedast cross-section unit for the
heterozedastic group of the remained fixed-effect regression model. Autocorrelation problems
are also visible in the dataset. The wool box has been tested (2002). Furthermore, Breusk–Pagan
statistics contradicted a hypothesis of null transverse independence for residues of a linear
regression with a fixed effect. Therefore, the model has contemporary cross-sectional linkages.
The problem leads to inefficient FE and partial faults. This is solved using "Panel Corrected
Standard Error" (PCSE) technique.
The CIPS is robust for heteroedacity panel by panel and probable current linkages between
panels which should vary and be evaluated with the Durbin Watson approach. It can manage
unbalanced datasets as well. Since the synchronization is defined, PCSE provides projections
based on Winsten's pre-autocorrelation parameter estimates (s). The covariance parameter matrix
estimate of the disturbance covariance structure is linearly efficient and uses the FGLS
approximation of the disturbance covariance material.

CONCLUSION AND RECOMMENDATIONS:

This study evaluates one of the successful GDP predictors, namely R&D expenditure, based on
economic growth theories. The panel evaluates the associated R&D and GDP error technique for
the MENA region 2000-2016. This study revealed a favorable but modest link between research
and development investment and economic growth on average of the MENA literature's
endogenous growth theories. The limited link between technical developments in MENA
countries may be connected in absolute or relative terms to insufficient research and
development. In addition, the capital structure's influence on company governance is good but
limited. The same moderately beneficial influence on economic growth is the Gdp-controlled
variable economy and investment rate. The results of this study have the power to impact the
experience, knowledge and performance of the MENA industry. In recent years, while MENA
countries have been trying to reinforce connection, digital penetration and the establishment of a
knowledge-based society, there remains an enormous lack of creativity. Governments must also
have a good image of the growth of human capital through reform of education and the labor
markets. If they lack business knowledge, training, the labor market as well as the innovation
industry will not be extremely good. To encourage economic growth and productivity in MENA
countries, it is vital to improve the quality and quantity of public and private infrastructure,
increase knowledge workers' skills and adopt policies to assist private sector infrastructure.
Nevertheless, the periods and breadth of domestic R&D studies in organizations and policy and
research sectors in MENA nations need to be enhanced. On these fronts, if MENA countries
succeed, the industrial Revolution 4.0 and the industrializing countries will stop.
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