The Impact of R&D Investment on Economic Growth: Evidence from Panama Using Elastic Net and Bootstrap Techniques

This study analyzes the impact of research and development (R&D) investment on economic growth in Panama, an emerging economy with structural challenges in its innovation system. Using a multivariate econometric approach that included elastic net regularization and fixed-effect panel data estimation, the analysis incorporated key explanatory variables such as public education expenditure, inflation, infrastructure investment, population growth, and exports. The results indicated that both R&D and education spending have a positive and statistically significant effect on GDP growth, while inflation has a negative impact and exports show no significant effect. To ensure robustness, the study applied the augmented Dickey–Fuller test for stationarity, nonparametric bootstrapping (1000 replications), and multiple diagnostic tests, including RMSE, adjusted R2, Durbin–Watson statistic, and White’s test. Scenario-based projections suggest that gradual and sustained increases in R&D investment, supported by stronger institutional coordination and absorptive capacity, could enhance Panama’s long-term productivity and innovation outcomes. The findings underscore that improving R&D funding alone is not sufficient; effective governance and coherent science, technology, and innovation (STI) policies are essential. This research contributes empirical evidence to a relatively underexplored area in the development literature and offers strategic insights for policymakers seeking to build more integrated and sustainable STI ecosystems in emerging economies.