Abstract

This paper analyzes the impact of research and development (R&D) activities, such as regional R&D budget allocation and workforce development, on regional economic growth. The premise is that industrial advancement in regions propels economic growth and that R&D activities are key to adding high value to these industries. This study examines the heterogeneous impacts of R&D inputs and innovation outputs on regional economic performance across South Korean provinces from 2011 to 2021. Using a dynamic panel dataset and applying both two-way fixed effects (FE) and system GMM estimators, the analysis addresses econometric challenges identified in previous studies—including autocorrelation, heteroskedasticity, endogeneity, and multicollinearity—ensuring robustness through model comparison and specification testing. The findings demonstrate substantial regional variation in the effectiveness of R&D investments: manufacturing-driven regions such as Ulsan exhibit high Gross Value Added (GVA) per capita despite relatively modest R&D intensity, while research-oriented regions such as Daejeon and Sejong show high R&D expenditures that do not translate into short-term productivity gains. These results suggest that the relationship between R&D and economic performance is mediated by industrial structure, absorptive capacity, and the degree of commercialization embedded within regional innovation systems. Although additional structural variables—such as industrial composition, educational attainment, and foreign direct investment—could further strengthen the analysis, consistent annual regional-level data for these indicators were not available during the study period. As more refined datasets emerge, future research will incorporate these dimensions to better capture the mechanisms through which R&D contributes to regional growth. Overall, this study reinforces the theoretical link between innovation and economic development and highlights the need for differentiated, region-specific R&D policy strategies that emphasize output quality, human-capital-based investment, and system-level integration rather than aggregate input expansion.