This study examines the effects of communication infrastructure, R&D expenditure, total population, government spending, and money supply on innovation using panel quantile regression for 34 developing countries from 2000 to 2023. The aim is to analyze how these effects vary across different quantiles of the innovation distribution (low, middle, and high).

Results show that the impact of these variables depends significantly on countries' positions in the innovation distribution. Communication infrastructure has a positive and significant effect from the first to the sixth quantile, but this effect becomes negative and insignificant from the seventh quantile onward, suggesting diminishing returns and saturation at high innovation levels. R&D expenditure is positive and significant across all quantiles, with the largest coefficients in the second and eighth quantiles, indicating effectiveness at all stages of innovation development. Total population has a positive and significant effect across all quantiles, though its magnitude slightly decreases at higher quantiles, highlighting the growing importance of quality over quantity. Government spending is negative and significant in the second quantile but becomes positive from the fifth quantile onward, reaching significance in the sixth, seventh, and ninth quantiles. This reflects a shift in government's role from an obstacle in early stages to a supporter in advanced stages. Money supply has a positive and significant effect in the first and second quantiles, a positive but insignificant effect in the third to sixth quantiles, a renewed positive and significant effect in the seventh and eighth quantiles, and an insignificant effect in the ninth quantile. This suggests that the effect of money supply is strongly mediated by financial institution quality and economic stability. Robustness checks using FMOLS, RLS, and lagged variables confirm the stability of results.

In conclusion, innovation drivers are not uniform across development stages. Effective policymaking requires strategies tailored to each country’s position in the innovation distribution. A one-size-fits-all approach cannot guide developing countries toward innovation; instead, targeted, stage-specific policy packages are needed.