Are systems of innovation in Eastern Europe efficient?

This paper explores the determinants of productivity in the countries of Eastern Europe (EE) through the perspective of 'narrow' and 'broad' national systems of innovation (NSI). Based on panel econometrics, it examines the extent to which systems in EE could be considered '(in)efficient'. Our results suggest that the EE countries have lower levels of productivity than might be expected given their research and development (R&D), innovation and production capabilities. The inefficiencies of 'broad' NSI are compounded by the inefficiencies of 'narrow' NSI in terms of generating numbers of science and technology publications and resident patents relative to R&D employment compared to the rest of the world. Our results point to an important distinction between technology and production capability as the drivers of productivity improvements and provide some policy implications.

► EE growth is driven by production, not innovation capabilities. ► Production capability does not automatically lead to innovation capability. ► EE countries are inefficient at converting their R&D, innovation and production capabilities into appropriate levels of productivity. ► EE countries are inefficient in converting their R&D and production capabilities into S&T papers and resident patents. ► Inefficiencies in broad and narrow NSI carry important policy implications.