How Industrialization and Innovation Shape Productivity: Evidence from Sustainable Development Goal 9 Indicators

This study examines how industrialization and technological upgrading measured through Sustainable Development Goal 9 (SDG 9) indicators influence total factor productivity in the industrial sector. Using panel data for 52 economies from 2012 to 2021 with the feasible generalized least squares method and a panel threshold regression model that applies the Economic Complexity Index as the threshold variable, the results show that a higher industrial share in gross domestic product (SDG 9.2.1) and greater medium- and high-technology value added (SDG 9.b.1) increase productivity, while a reliance on low-skilled manufacturing (SDG 9.2.2) and higher carbon dioxide emissions per unit of manufacturing value added (SDG 9.4.1) reduce it. The analysis indicates that the achievement of SDG 9 mainly strengthens technical efficiency through technology absorption and process improvements, rather than advancing the technological frontier. Productivity gains are stronger in economies with lower economic complexity but weaken in more advanced ones due to rising sustainability and compliance pressures. These findings highlight the need for industrial policies tailored to economies’ structural conditions.