The Impact of Institutional Factors on R&D Expenditures: An Analysis for D-7 Countries

Research and development activities (R&D) positively affect a country's production infrastructure and the productivity of existing factors and thus lead to economic growth. On the other hand, the emergence of research and development activities in a country is closely related to the institutional structure that determines how to live and produce. In other words, the institutional structure influences individual behaviour patterns and affects the processes of being entrepreneurial, libertarian, innovative and supporting research and development activities of firms. Institutional factors should be considered as habits, norms, rules and bureaucratic processes that determine the whole economic, social and political life of a country. The existence of a strong and effective institutional structure plays a vital role in reducing or preventing growth and development problems by affecting economic processes. R&D expenditures, on the other hand, affect the innovation infrastructure of a country and thus the production potential and efficiency of production. In this context, the study seeks to answer the question of how R&D expenditures will be affected when there is an improvement in institutional factors or how a change in R&D expenditures will affect institutional factors. In this study, a panel data model is used for the period 1996-2022 for selected D-7 countries (USA, Germany, France, UK, Italy, Canada and Japan). As a result of the study, it is concluded that as institutional quality indicators improve in D-7 countries, R&D expenditures also increase. Keywords: R&D, Institutional Economics, Panel data analysis.