Factors behind the innovation performance in the European regions

Abstract

Identification of the factors that shape the effectiveness of innovation activities is important for promoting regional development. The paper aims at evaluation of determinants of innovation performance in the European regions. In order to investigate this issue we apply a fixed effects regression model on a 5-year longitudinal dataset of 190 European regions. We explore four groups of determinants of innovation performance: technological innovation capital, non-technological innovation capital, human capital and network capital of regions. In order to assess regional innovation performance we use a variable measuring the relative ability of firms to generate revenues from sales of product or process innovations. The results of analysis indicate that all examined forms of regional innovation capital exert positive and statistically significant impact on innovation performance, except human capital for which our evidence seems ambiguous. The strongest impact on the relative ability to generate revenues from sales of innovations seems to be exerted by the technological innovation capital (measured by intensity of public sector R&D expenditures), closely followed by non-technological innovation capital (measured by the non-R&D innovation expenditures in firms). Our results also demonstrate a somewhat weaker, positive influence of collaboration on innovative activities (used as a proxy of network capital) on the aforementioned firms’ revenues. Surprisingly, human capital (measured by the share of population aged 25-64 with tertiary education attainment) turned out to have positive but statistically insignificant impact on innovation performance.

Keywords

• r&d expenditures
• technological capital
• non-r&d expenditures
• human capital
• network capital
• effectiveness