Technological Innovation, Economic Growth, and Environmental Sustainability: A Global Dynamic Panel Analysis

Abstract

Technological innovation plays a crucial role in economic growth, but its environmental implications remain complex. This study examines the relationships among technological innovation, economic growth, and environmental sustainability using global panel data covering 1998–2024. Fixed-effects and two-step system generalized method of moments (GMM) estimators are employed to assess the effects of innovation indicators, foreign direct investment (FDI), research and development (R&D) expenditure, financial development, energy consumption, and trade openness on economic growth and carbon dioxide (CO₂) emissions. The findings reveal that economic growth, FDI, and patent applications are generally associated with increased emissions, highlighting the environmental costs of economic expansion. R&D expenditure reduces emissions in the individual dynamic specification but exhibits a negative short-run association with economic growth. High-technology exports are associated with lower emissions, although their growth effects remain inconsistent. Trade openness generally promotes economic growth while reducing emissions, whereas energy consumption significantly increases emissions without consistent growth benefits. These findings underscore the importance of promoting green innovation, sustainable FDI, renewable energy adoption, and environmentally responsible trade. The study highlights the need for coordinated policies that reconcile economic development with long-term environmental sustainability.