Linking Government Investments in Higher Education and R&D to Economic Complexity: What Should Policymakers Consider Within an Entrepreneurial Economy? An Endogenous Growth Perspective with an Inquiry on Singapore and South Korea

Abstract

This study aims to try to understand what possible contributions may give economic complexity theory in the understanding of new policy perspectives and implications under government investments in higher education and R&D. To pursue this objective but hampered in part by the absence of reference points in previous works, knowledge capital, i.e., one of the dominant production factors in the latest entrepreneurial economy helps to elucidate the nature and the functions of higher education and R&D investments within it and, also, to include both complexity and economic complexity theory in the discussion. Mainly based on the extraordinary work of Hausmann, Hidalgo et al. of the last decade, several interrelated concepts and measures are therefore linked to explore a divergent view of the dynamics of knowledge diffusion. Thus, taking an endogenous growth perspective, where long-run growth rate is chiefly driven by human decisions and where knowledge investments play a crucial role, two Asia-Pacific countries (Singapore and South Korea) that in forty years have grown until the top spots of the economic complexity ranking were considered. On this foundation, a Vector Autoregressive approach was chosen to provide an exploratory understanding of the quantitative relationship between the time series variables of higher education and R&D expenditure and the ones of the Economic Complexity Index. Notwithstanding the results should not be considered as merely representative of general development trends world-wide, they help to justify the reasons why both countries’ experiences were taken as a base to discuss, at the bottom, the inclusion of the economic complexity contributions into the policy debate.