Measuring the Importance of Innovation in Portuguese Economic Development

Under the assumption that innovation and the processes of technological change are crucial to economic development, this research sought to measure the relative importance of innovation for economic development in Portugal. To this end, data were collected from official statistics produced by the government of Portugal and the European Union, primarily from the Pordata, Eurostat, and Directorate-General for Statistics of Education and Science databases. The statistical technique used in the present investigation was random forest, best exemplified as a supervised machine learning algorithm. The results suggest that R&D expenditure and its outcomes — patent and design/model applications and grants — contribute to Portuguese economic development, mainly through an upward gradient relationship. In addition, our research provides evidence that product and process innovations are marginally positioned in the hierarchy of importance for Portuguese economic development when analyzed in conjunction with other innovation inputs and outputs. These results provide evidence that the Portuguese National Innovation System has been configured in a disjointed manner, especially concerning the development of structured stimuli that foster the emergence of innovations with real impacts on Portuguese economic development. This study contributes to the literature by highlighting the need for more synergy within Portugal’s National Innovation System. Future research should explore the mechanisms through which product and process innovations can significantly impact economic development.