Abstract
Abstract In this paper we conduct a meta-analysis to examine the link between R&D spending and economic growth in the EU and other regions. The results suggest that the growth-enhancing effect of R&D in the EU15 countries does not differ from that in other countries in general, but it is less significant than that for other industrialized countries. A closer inspection of the data reveals that the weak results for the EU15 stem from comparisons with the US – the US has been able to generate a stronger growth response from its R&D spending. Possible explanations for the US advantage include higher private sector investment in R&D and stronger public-private sector linkages than in the EU. Hence, to reduce the “innovation gap” vis-à-vis the US, it may not be enough for the EU to raise the share of R&D expenditures in GDP: continuous improvements in the European innovation system will also be needed, with focus on areas like private sector R&D and public-private sector linkages.
Highlights
The European Union’s growth strategy for the period 2010–2020 identifies innovation as one of the key measures for achieving “smart, sustainable, and inclusive growth” (European Commission, 2010)
The arguments related to short-term benefits – the belief that higher R&D investments may facilitate the recovery from the global financial crisis – are less theoretical, and instead based on the observation that the countries investing more in R&D have been less severely affected by the crisis (European Commission, 2013)
In this meta-analysis, we have investigated the link between R&D spending and economic growth using a sample of 49 studies, yielding a total of 538 observations
Summary
The European Union’s growth strategy for the period 2010–2020 (the Europe 2020 Strategy) identifies innovation as one of the key measures for achieving “smart, sustainable, and inclusive growth” (European Commission, 2010). The quality of higher education, the efficiency of the labor market, incentives and attitudes toward entrepreneurship, openness to trade and foreign direct investment, the availability of venture capital, the quality of market institutions, and the availability of infrastructure are only some of the determinants identified in the literature (Afonso et al, 2005; Edquist, 2005; Herrera and Pang, 2005; Jaumotte and Pain, 2005a, 2005b; Lundvall, 2007) In many of these areas – in particular those related to entrepreneurship, venture capital, and market institutions – the US is often promoted as a best-practice example, suggesting that the US position as a global technology leader has more to do with an efficient innovation system than with higher R&D expenditures (Atkinson, 2014).
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