Innovation and welfare: the marriage of an unlikely couple

Abstract

Studies on innovation and welfare are seemingly unrelated and, currently, scholars of innovation and welfare form distinctive groups. However, recent developments in the fields of business and psychology suggest that a social safety net and the positive mental assets that can be developed by implementing carefully designed welfare programs may stimulate innovative activities within a country. Further, they are closely connected due to their contribution to economic growth, which forms the central tenet of the discourses on both innovation and welfare. In this context, this study uses the patent applications filed under the Patent Co-operation Treaty and social spending data of 35 Organisation for Economic Co-operation and Development countries for the period 2000-2015 to investigate the effect of welfare on innovation. Contrary to the widespread belief that welfare spending can undermine innovative potential, we argue that welfare can harness a country's innovative potential and contribute to the country's long-term growth.