Innovation and Government Bureaucracy

ABSTRACT Using a panel of 42 countries over the period 2004–2018, we investigate the extent to which better bureaucratic performance influences innovation outcomes. We first find that a one‐unit improvement in the bureaucratic performance index raises patent applications by 1813 at the median knowledge capital stock. Second, this effect is heterogeneous, with the increase in patent applications being approximately 28% larger at the 95th percentile of the knowledge stock compared to the median. Third, the strong significance of bureaucratic performance on innovation holds across technology groups. Robustness checks buttress this evidence.