Asymmetric Effects of Innovation on Industrialization in Emerging and Frontier Economies

Innovative capacity is potentially important for industrial advancement across economies. However, little is known about the effect of innovation on industrialization in emerging and frontier economies. This study investigates whether the impact of innovation on industrialization differs for emerging and frontier economies over the period 1990 to 2021. We employ Generalized Quantile Regression (Adaptive MCMC optimization) and Nonlinear Autoregressive Distributed Lag (NARDL) models for long-run analysis. The results show that innovation promotes industrialization in emerging economies, while it depresses industrialization in frontier economies. This suggests that while emerging economies have sufficient innovative capacity to support industrialization, frontier economies do not. The asymmetrical results also indicate that innovation can create tensions with SDG 8 and SDG 12 when adopted without adequate foundational readiness. Policymakers in emerging economies should accelerate technological upgrading and integrate innovation into industrial strategies, while ensuring that innovation-driven growth supports decent work and responsible production. In frontier economies, policy should first strengthen infrastructure and basic manufacturing capabilities before expanding innovation efforts, so that gradual adoption avoids job displacement and unsustainable production patterns.