Is Innovation in Pakistan Driven by Specialisation or Diversity?

Adeel Ali, Syed Faizan Iftikhar, Sabihuddin Butt


Innovation is among the main drivers of industrial development
leading to economic growth. However, the question triggers that what
drives innovation? Is innovation driven by specialisation or
diversification? The literature has supported both, the specialisation
and diversification as driver of innovation. Therefore, the purpose of
this paper is to explore the determinants of innovation in Pakistan with
a special emphasis on specialisation and diversity. The analysis is
based on the cross sectional data set of 784 firms across 13 different
cities of Pakistan, i.e. Investment Climate Survey (ICS) 2007, compiled
by the World Bank Enterprise Group. Our findings have showed the
positive relation between innovation and diversity i.e. diversity is
conducive to innovation. On the other hand, specialisation has a
negative effect i.e. it hinders innovation in cities of Pakistan. JEL
Classification: C21, C25, O31, O32 Keywords: Innovation, Specialisation,
Diversity, Logistic Regression

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