Assessing the effect of innovation determinants on macroeconomic development within the EU (28) countries

Abstract

Innovations play an inevitable role in achieving macroeconomic growth of countries, and innovative activity is perceived as a source of sustainable development. This paper's main objective is to explore the impact of innovation determinants on the macroeconomic development of the EU (28) member countries and identify key problem areas distorting sustainable development and growth of these countries. The research analysis is performed using panel data regression models estimated from 2010 to 2018. Innovation potential was quantified using selected indicators, such as patent granted, high-tech exports, gross domestic expenditures on R&D, government expenditure on education, direct investment, gross fixed capital, and tertiary educational attainment. Such indicators as real GDP per capita and GNI per capita were applied to measure economic growth. The results provide evidence of a statistically significant relationship between innovation and economic growth (p < 0.01). Therefore, both research hypotheses were accepted. Based on innovation potential assessment, the statistically significant impact of five indicators were confirmed (high-tech exports, gross domestic expenditure on R&D, government expenditure on education, direct investment, and tertiary educational attainment). In this backdrop, the most significant effect was revealed for variable gross domestic expenditure on R&D (0.5343). The findings lead to the conclusion that the EU's and national innovation policies and initiatives should aim to create framework conditions that favor the innovation environment and increase R&D expenditure to endorse real economic growth.