Innovation and competitiveness in the periphery of Europe

The European Union (EU) is confronted with a host of ‘knowledge-related pressures’ from an evolving geography of innovation. Simply stated, the EU is in the unenviable position of losing ground to the United States in terms of knowledge production, research and innovation, whilst becoming increasingly susceptible to competition from emerging economies. The EU has responded to these pressures and the need to foster innovation by prioritizing research and development (R&D) investment. Such a strategy, however, may benefit some member states to a greater extent than others. More developed, ‘core’ territories are more conducive to knowledge-intensive, innovative activity and can better capitalize on increased R&D expenditure. Lagging, peripheral territories, on the other hand, are burdened by a host of structural, socioeconomic and institutional deficiencies that may inhibit the emergence of knowledge-intensive activity. The distance between the capabilities of peripheral regions and the technological frontier may be too great to overcome. The aim of this chapter is to address these concerns and assess the effectiveness of the EU’s approach. It explores whether increases in R&D investment have enhanced the innovative capacities, impelled economic growth, or improved labour market outcomes in the peripheral regions of the EU. The chapter undertakes an exploratory analysis of the correlations between increased R&D investment and changes in innovative capacity and socio-economic development within the EU. Factors which may explain these limited returns to R&D expenditure in peripheral territories are explored. The chapter concludes by introducing a series of policy implications formed on the basis of the analysis.