How can lower-income countries integrate in the innovation-led global economy?

Lower-income countries face a persistent challenge: innovation activities tend to concentrate in more developed regions. Existing research offers limited solutions, often emphasizing local advantages or frugal innovation to reduce regional disparities. This study challenges the conventional approach of competing with advanced economies and proposes an "integrative" strategy that treats innovation as a multifaceted process encompassing diverse activities. Building on Capello and Lenzi's (2014) distinction between innovation and commercialization, and Bar-El's (2023) differentiation between knowledge creation and implementation, we analyze the drivers of these two innovation types across national income levels. Using regression analysis on the 2024 Global Innovation Index (GII) and K-means clustering, we identify key patterns among high- and lower-income countries. Our findings reveal a malfunctioning ecosystem for knowledge creation in lower-income countries, where policy support is less effective than it is for the knowledge implementation. Knowledge creation is largely associated with activity by global corporations, contributing to a dual economy with limited local impact. Furthermore, in both income groups, knowledge implementation does not necessarily rely on domestic knowledge creation; instead, these innovation types function independently. In lower-income countries, knowledge implementation is driven by the adaptation of imported knowledge, skilled labor and efficient logistics. We classify lower-income countries into three clusters: (1) high implementation with some creation, (2) corporate-led creation with low implementation, and (3) minimal activity in both domains. These findings suggest that innovation policies in lower-income countries should prioritize implementation—enhancing technology adoption, logistics, and workforce skills.