Navigating innovation gaps in the Western Balkans through the lenses of Economic Complexity

Over the past decade, the Western Balkans have been gradually aligning their research and innovation systems with the European Research Area and adopted Smart Specialisation Strategy (S3) as relevant framework for place-based innovation policies. Despite recent improvements in innovation performance, the region continues to face structural constraints that hinder convergence with the European Union, making it crucial to understand regional capabilities to close innovation gaps, and Economic Complexity approach can provide a robust framework by inferring productive capabilities, assessing technological sophistication, and identifying feasible diversification pathways. In such a context, this study applies the Economic Complexity framework to Western Balkans granular export data over the past decade to assess patterns of structural transformation and convergence. The findings indicate that the region has made notable progress in narrowing the gap in export volumes relative to Europe, particularly in comparison with the European Balkans. Notwithstanding these improvements, the average level of sophistication of the Western Balkans’ sectoral specialisation remains significantly below the European benchmark and continues to be concentrated in low-complexity activities, with only a limited number of emerging higher-value niches. Evidence from global complexity rankings further suggests that, although the Western Balkans have modestly improved their relative positions - primarily through advances in trade and research-related indicators - the technological gap with Europe has, in fact, widened. These quantitative results are complemented by qualitative insights derived from interviews with key stakeholders involved in the design and implementation of Smart Specialisation Strategies across the Western Balkans.