The impact of the innovation on the economy: an empirical analysis for Azerbaijan

Innovation is a basic and important element of economic success. Innovation is seen as a significant factor in boosting product competitiveness in both domestic and global markets, replacing outdated manufacturing equipment, and creating demand for highly skilled workers. It is commonly acknowledged that for the state to develop an effective scientific and technical policy, an information base that depicts the status, scale, and direction of innovation activities throughout the economy is required. Therefore, it is critical to consider both the decimal and descriptive aspects of the information. In short, creating the groundwork for an innovative economy is critical to achieving good outcomes in the country's socioeconomic growth. The study's major goal is to examine the economic effect of innovative development in Azerbaijan. The State Statistics Committee of the Republic of Azerbaijan provided the study with statistical information for the years 2000–2021. To begin, the study performed a literature review of various scholars on the issue, and the initiatives adopted by the state in different years to promote creative growth in Azerbaijan were analyzed. Furthermore, indicators such as GDP, the number of people employed in the economy, fixed assets, and innovation costs were utilized to estimate the impact of innovations on economic growth. When coefficients represented in individual variables in the generated model are compared, it is clear that the influence of innovation costs (0.877 or 87.7%) on the amount of activity in the economy is bigger than the effect of fixed assets (0.292 or 29.2%) and the number of employees (0.020 or 2%). At the 0.05 level of significance, the t-statistics and their probabilities associated with the coefficients show that the number of employees has a negative effect on GDP, whereas production funds and expenditure on innovations have statistically significant positive effects on GDP. The estimated F-Statistic and its probability imply that the cumulative result of innovation expenditure on GDP is statistically significant. The study claims a connection between innovation spending and GDP, and that the former has a major influence on the latter. The research also demonstrates that the model's explanatory variables account for about 98.4% of the changes in the explained variable. This suggests that, in the framework of the model, spending on innovation accounted for about 98.4% of the variation in GDP over the study period. This study, therefore, contributes to the expanding amount of evidence indicating that expenditure on innovation is related to and has a significant impact on GDP. The results of the model also show that an increase in production funds of 1% generates a rise in GDP of 29.3%, a rise in employee numbers of 1% causes a boost in GDP of 2%, and an expansion in innovation expenditures of 1% causes a GDP rise of 87.7%. In this regard, it is thought appropriate to raise innovation costs, particularly during the digital economy transition.