Innovating (a Lot) With a Little: High-Tech Innovation in Southeast Europe

Abstract

Motivation: According to the European Innovation Scoreboard (EIS, 2020), Southeast-European countries are either modest or moderate innovators because they consistently innovate below the EU average. Given that innovation is a key driver of economic growth (Hasan & Tucci, 2010), this implies that Southeast Europe has been economically falling back while simultaneously politically integrating with the EU. However, the EIS categorizes countries according to the inconclusive arithmetic mean of indicators for firm-level innovation (bottom-up) and indicators for inputs and enablers of innovation at the national level (top-down). Besides, it does not separately assess innovation performance of high-technology industries although these are crucial for international competitiveness (Schwab, 2019). Consequently, this paper answers the following research question: What is innovation performance of high and medium-high technology industries in Southeast Europe in comparison to the EU average? Idea: In contrast to the EIS which merges top-down with bottom-up innovation indicators, the core idea of this paper has been to analyse only bottom-up data on comparative innovation performance of high and medium-high technology industries in Southeast Europe. Method and data: The paper methodologically draws on guidelines for collecting, reporting, and using data on innovation by Oslo Manual (OECD & Eurostat, 2018), and uses secondary data from 2010-2016 Community Innovation Surveys of enterprises to compile an own set of 140 data points. Innovation activity within an industry is defined as the ratio of innovative enterprises to the total population of enterprises while innovation performance is the ratio of innovation activity in the respective country to innovation activity of this industry in the whole EU. Tools: All data points have been arranged country-wise as unbalanced contingency panels and plotted to draw conclusions on innovation performance of high and medium-high technology industries in Southeast Europe. Findings: Although all top-down innovation inputs and enablers at the national level are far below the EU average throughout Southeast Europe, several industries in the region reach or surpass the average EU innovation performance: the pharmaceutical industry in Croatia, all medium-high technology industries in Turkey, manufacture of machinery in North Macedonia and Serbia, as well as manufacture of motor vehicles in all countries except for Romania. Contributions and limitations: This is the first known paper to benchmark innovation performance of high and medium-high technology industries throughout Southeast Europe. In addition, the paper reveals the shortcomings of the whole-country method employed by the EIS since it clearly points out that innovation performance of national industries should be assessed instead. Limitations of the paper are the exclusive focus on innovation as a process and partly restricted data availability.