The relationship between TFP and innovation performance: evidence from EU regions

Abstract

Research background: Total factor productivity (TFP) determines how efficiently and intensely the available inputs are used and combined in production process. Improvement of TFP performance requires identification of its determinants, thus enabling policy actions to focus on them. Since the ability to create and absorb innovation is considered as a crucial factor of economic development, the investigation of the impact of the level of regional innovative performance on TFP distribution across EU regions is an important research problem. 
 Purpose of the article: The aim of the paper is twofold. Firstly, we attempt to develop a theoretical framework for the analysis of the impact of innovation on TFP. Secondly, we assess TFP levels for regions in the EU and investigate whether innovations account for the observed regional disparities in TFP.
 Methods: The research sample consists of 202 European Union (EU) regions at NUTS 1 and NUTS 2 level from 22 countries. The regional data on GDP, employment and gross fixed capital formation come from the Eurostat. The source of data on the level of innovativeness of European regions is the Regional Innovation Scoreboard. To calculate TFP, we use the multiplicatively-complete Färe-Primont index. In turn, to examine the impact of innovation on TFP, we employ the spatially-lagged X model.
 Findings & Value added: Our findings show a high degree of dispersion in TFP across EU regions. We find a positive impact of regional innovation performance on TFP. Although theoretical papers on economic development and regional economics suggest that improvements in TFP are key to regional economic performance, and that innovations are crucial to gain such productivity effects, there is a dearth of empirical studies on the link between innovation and TFP at the regional level. Therefore, our paper attempts to fill this gap by providing the evidence of positive effect of innovation externalities on TFP in European regions.

Service Sector Productivity in the European Union Member States

“…The authors observed that higher innovation intensity is associated with more incredible productivity growth (in both sectors). The positive impact of innovation on productivity, expressed in TFP -Total Factor Productivity, was also observed in the research carried out by Kijek and Matras-Bolibok (2019).…”

Energy Transition in Poland—Assessment of the Renewable Energy Sector

“…The changes caused by the progressing globalization mainly concern the increase in interdependence between economies, changes in the functioning of selected markets and institutional changes [4][5][6][7][8]. Undoubtedly, the globalization processes have led to systematic socio-economic development in most world economies, combined with a significant increase in the level of innovation, the level of investment outlays and the level of foreign direct investment [9][10][11][12][13][14][15][16]. Globalization processes have also contributed to the emergence of new lifestyles and consumption styles [17][18][19][20], which together with the increase in the wealth of the society and the level of innovation in enterprises contributed to the creation of the renewable energy (RE) sector, which is one of the fastest developing branches of the world economy [21][22][23][24][25].…”

Analyzing the root of regional innovation performance in the European territory

“…The Regional Innovation Scoreboard (RIS) includes a broad comparative analysis, with regard to the performance of innovation in different regions/countries of the EU, as well as other regions/countries neighboring the EU. Specifically, it shows the impacts on the economy resulting from innovation activities (Kijek and Matras-Bolibok, 2019). RIS classifies countries/regions into four distinctive groups of innovation performance: Leader, Strong, Moderate, Modest (RIS, 2016).…”