Competitiveness and innovation in Europe. The impact of business cycles and country groups on Export, R&D and New Products

30  March 2015    4:00 pm

Dario Guarascio, Sapienza University of Rome


wiiw, Rahlgasse 3, 1060 Vienna, lecture hall (entrance from the ground floor)


The paper investigates the links between export, R&D and new products. Technological efforts and international competitiveness are at the root of successful economic performance in advanced economies. Moreover, they are widely seen as key factors for the ability of European countries to return to growth after the 2008 crisis. We present a model for the structural relationships between R&D efforts, innovation success and export performance, carrying out an empirical test for 38 manufacturing and service sectors of six major European countries. The theoretical framework moves from the model developed by Bogliacino and Pianta (2013) and extends it to international competitiveness – captured by industries’ export market shares (Guarascio et al., 2014). We use a model of simultaneous equations exploring feedbacks and structural linkages between our key variables. First, the ability of industries’ R&D to lead to successful innovations is explored, combining supply push and demand pull drivers. Second, the determinants of export shares are identified, considering both the role of technological competitiveness, cost competitiveness as well as international fragmentation of production factors. Third, we investigate the feedbacks of export success and profits on further sectoral R&D efforts. Furthermore, some extensions of the approach proposed in Guarascio et al. (2014) are presented. Firstly, the contrast between patterns in Northern and Southern EU countries is examined, with separate tests, showing the dynamics of the ‘virtuous circle’ in each area. Then, the impact of business cycles, manufacturing/services distinction and technological clusters on the identified relations is assessed, following the approach of Lucchese and Pianta (2012).

Keywords: Export, R&D, Innovation, Three Stages Least Squares, Europe

JEL classification: F12, F14, O31, O33, O52