The Effects of Innovation and Investment Climate on Employment in South Asia

This paper uses data for six South Asian countries, i.e. Afghanistan, Bangladesh, Bhutan, India, Nepal and Pakistan, to study the combined effects of innovation (product, process, organizational, marketing and logistic) and investment climate on employment. Results show that organizational, marketing and logistical innovation have significant positive direct effects on employment. The direct effect of product and process innovation on employment is also positive, but not significant. With respect to investment climate conditions we find that inferior infrastructure, as well as burdensome regulation, have a negative direct effect on employment. Interactions between the various forms of innovation and investment climate variables, show that the effect of inferior infrastructure and burdensome regulations, furthermore negatively affects and thereby weakens the positive effect of innovation on employment.