- CESEE region has doubled its R&D personnel and increased investments in intellectual property from 10% to 12% over the past decade
- CESEE productivity growth, key to strengthen the competitive position of the region, has outpaced that in North and West EU. Recent trends are showing signs of deceleration
At the Invisso Conference in Vienna, the European Investment Bank (EIB) has released a comprehensive working paper examining the state of innovation in Central, Eastern, and South-Eastern EU (CESEE) countries, in the context of the EU long term competitiveness’ discussions. This paper highlights the region's significant progress in enhancing innovation capacity over the past decade, while also addressing persistent challenges that threaten its growth and competitiveness.
Stimulating innovation across the CESEE region faces numerous challenges, many of which are not unique to the region. These challenges include increasing the availability of the skills necessary for innovation, securing adequate risk capital, adopting cutting-edge technologies, all while improving the overall business environment. Labour shortages are already prompting some firms to shift their innovation activities from the North and West of the EU to the CESEE region, and within the CESEE region to its less developed areas.
"Convergence requires significant support for innovation investments, including increasing R&D and the skills of workers, in CESEE region. That is why, at the EIB, we are committed to supporting the innovation landscape in CESEE countries," stated Kyriacos Kakouris, Vice President of the EIB. "Our collaboration with local stakeholders and international partners from the public and private sector is essential to overcoming the barriers to innovation and ensuring that the region can compete on a global scale."
The working paper reveals that businesses in the CESEE region have doubled their R&D personnel and it increased investments in intellectual property from 10% to 12% over the past decade; moreover, labour productivity in the region, at 1.9% per annum, grew significantly more than in North and West Europe over the past decade. However, CESEE economies still face a severe skills shortage. In addition, only eight of the world’s largest 2,500 R&D investors are headquartered in the CESEE region. Germany alone filed nearly 25,000 patents with the European Patent Office in 2023 (compared to only 1,600 in the CESEE region).
The report also highlights that R&D spending in the CESEE region is about half of that in the North and West of the EU, with businesses in CESEE spending only 0.8% of GDP on R&D compared to 1.8% in other regions. Innovation activities in CESEE are largely concentrated in manufacturing, ICT and pharmaceuticals, with significant disparities across firms and geographies. While productivity growth in the region has outpaced that in North and West EU, recent trends are showing signs of deceleration. "Strengthening innovation is crucial for raising living standards and for strengthening the competitive position of the CESEE region," said Debora Revoltella, EIB Chief Economist. "Our findings underscore the need for targeted policies to improve the availability of skilled labour and secure adequate risk capital (venture capital for instance), which are essential for fostering innovation-driven growth and upgrade the growth model of the region."
Dashboards included in the paper provide an overview of country-specific innovation characteristics, illustrating how research-intensive sectors contribute significantly to GDP growth across different CESEE countries.
The working paper - which is part of a joint study about CESEE competitiveness of the Oesterreichische Nationalbank (OeNB), the Vienna Institute for International Economic Studies (wiiw) and the European Investment Bank (EIB) - is available here.
Background information
EIB
The European Investment Bank (ElB) is the long-term lending institution of the European Union, owned by its Member States. It finances investments that contribute to EU policy objectives. EIB projects bolster competitiveness, drive innovation, promote sustainable development, enhance social and territorial cohesion, and support a just and swift transition to climate neutrality.
The EIB Group, which also includes the European Investment Fund (EIF), signed a total of €88 billion in new financing for over 900 projects in 2023. These commitments are expected to mobilise around €320 billion in investment, supporting 400 000 companies and 5.4 million jobs.
All projects financed by the EIB Group are in line with the Paris Climate Accord. The EIB Group does not fund investments in fossil fuels. We are on track to deliver on our commitment to support €1 trillion in climate and environmental sustainability investment in the decade to 2030 as pledged in our Climate Bank Roadmap. Over half of the EIB Group’s annual financing supports projects directly contributing to climate change mitigation, adaptation, and a healthier environment.
Approximately half of the EIB's financing within the European Union is directed towards cohesion regions, where per capita income is lower. This underscores the Bank's commitment to fostering inclusive growth and the convergence of living standards.