The role of green technology innovation, R&D, and renewable energy in Sweden’s economic competitiveness

Abstract

Sustaining long-term economic competitiveness depends on innovation and efficient resource use; yet, the role of green technology innovation (GTI) in enhancing productivity remains underexplored. This study examines the effect of GTI, research and development (R&D) expenditure, and renewable energy consumption on Sweden’s economic competitiveness, using total factor productivity (TFP) as a proxy, over the period 1993–2022. The novelty of this research lies in its country-specific, mechanism-oriented analysis and the combined use of the augmented autoregressive distributed lag (A-ARDL) framework and frequency-domain Granger causality (FDC). This approach allows us to capture both the average long-run effects and the temporal dynamics of the relationships. The findings reveal that GTI and R&D expenditure have positive and significant long-run effects on TFP, demonstrating that sustained technological innovation and knowledge accumulation are associated with productivity growth, while renewable energy has a negative and statistically insignificant impact. In the short run, environmental technologies and R&D temporarily reduce TFP due to adjustment costs and delayed returns to innovation, whereas renewable energy adoption yields immediate efficiency gains. FDC analysis shows bidirectional causality between GTI and TFP and unidirectional causality from renewable energy to TFP, with persistent long- and medium-term effects. This underscores the importance of coordinated policies that integrate GTI, R&D, and renewable energy adoption to support sustainable productivity growth and economic competitiveness.