The Impact of Interplay between Formal and Informal Institutions on Innovation Performance: Evidence from CEECs

Abstract

Formal and informal institutions matter in the context of the innovation performance of Central and Eastern European countries (CEECs). The purpose of the research was to investigate whether the interplay between formal and informal institutions has a positive, negative or neutral impact on the innovation performance of CEECs, and if formal or informal institutions alone also have a positive, negative or neutral influence on the innovation performance of CEECs. The research is based on informal institutions of CEECs such as trust, traditions, customs, creativity or cooperation, and formal institutions of CEECs such as law, formal rules, or science, technology and innovation policy (STIP). The research methodology focuses on secondary statistical data from 18,808 surveys from the European Social Survey Round 9 (2018) edition 2.0 for informal institutions and from 1090 innovation policies of European Commission and OECD STIP Compass and 414,073 notices of awarded tenders of the European Union Tenders Electronic Daily for formal institutions. Innovation performance was measured by the Summary Innovation Index (SII) of the European Innovation Scoreboard 2019. The findings show that informal institutions such as trust in others, trust in the legal system, the importance of following traditions and customs or cooperation among citizens of CEECs, as well as interplay between informal institutions such as trust in the legal system and formal institutions such as obedience to rules among citizens of CEECs have a negative impact on the innovation performance of the national economies of CEECs. Meanwhile, the variety of policy theme areas and creativity among citizens of CEECs have a positive impact on the innovation performance of the national economies of CEECs.