Drivers of national innovative systems in transition. An Eastern European empirical cross-country analysis

Abstract

Innovation plays a crucial role in determining todayﾒs economic growth patterns. But what enables some countries to innovate more than others? This paper employs in premiere a panel of sixteen Eastern European countries throughout their transition period exploring empirically the drivers of their national innovative capacity, a concept first developed in Furman et al. (2002). The significant disparities both within- and between Eastern Europe and its Western counterpart, in terms of innovational inputs, outputs and structure, provide an even more challenging task for analysis. As a proxy for the new to the world innovation I employ the number of international patent grants at the US patent office. The econometric analysis confirms the importance of R&D commitments and innovative tradition in the form of existing knowledge stock. Increased trade openness and intellectual rights protection determine higher international patenting, while the transition specific factors, such as structural industrial distortions or aggregated output drops, have a significant negative influence. Governmental funding and research performance of universities encourage more innovation at the technological frontier, while the business R&D funding in Eastern Europe is negatively correlated with it.