Innovation and natural resource rents: global evidence

Abstract

Purpose This study aims to examine the causal impact of natural resource rents on national innovation performance in 109 countries from 1980 to 2021. Using agricultural land suitability as an instrumental variable, the authors address the endogeneity of resource wealth and identify its effect on patenting activity. Design/methodology/approach This study draws the data set from 109 countries over the period from 1980 to 2021. In this study, the authors start with the simple OLS regression to evaluate the predictive power of the variable natural resources rent on the total number of applied patents. Next, the authors explain the model specifications for two-stages least squares. Findings The results show that higher natural resource rents lead to increased innovation, challenging the conventional resource-curse perspective. This effect is driven mainly by patent applications from nonresident inventors, suggesting that resource-rich economies attract foreign innovative activity. Overall, the findings highlight the importance of considering institutional and historical contexts when assessing how resource wealth shapes innovation outcomes. Originality/value Natural resources neither guarantee nor prevent innovation, what matters is how they are governed and embedded within broader historical and cultural contexts. For policymakers, the central challenge is to create institutional frameworks that transform temporary resource income into long-term innovative capacity. These findings underscore the importance of adopting appropriate policies that use resource wealth responsibly rather than relying on extraction alone. Moreover, the results highlight the need to strengthen governance, build on state historical capacity and acknowledge sociocultural factors such as religion in shaping innovation outcomes.