Governance Quality and Technology Innovation in Selected North American Countries

Abstract

This study examines the effect of governance quality on technological innovation, focusing on annual patent applications in North America (the United States, Canada, and Mexico). The governance quality was patterned after the World Bank World Governance Indicators (WGI), comprising the rule of law, government effectiveness, control of corruption and regulatory quality. Annual time-series data for each variable were obtained from the World Intellectual Property Organisation (WIPO) and the World Bank. The within-regression estimator and quasi-demeaning generalised least squares (GLS) were used to estimate the fixed- and random-effects models, respectively, while the Hausman test was used to select the appropriate model. The findings showed that the rule of law and government effectiveness significantly increased annual patent applications during the study period, indicating that stronger legislation and government commitment to technological innovation are critical for the growth of patent applications in Canada, Mexico, and the USA. At the same time, regulatory quality is significant in increasing technological innovation. This highlights the effectiveness of quality regulation in promoting patent applications. Additionally, the results show that controlling corruption significantly reduced annual patent applications in North American countries, implying that anti-corruption efforts might lower innovation spending and patent applications. Given the findings, this study recommends that governments should strengthen patent enforcement, ensure a transparent judicial process, and improve dispute-resolution mechanisms to boost innovators’ confidence and encourage greater patent applications.