Systems of Innovation in Central and Eastern European countries: Path of Economic Transition and Differences in Institutions

Abstract

Against the background of the current political developments in Central and Eastern European (CEE) countries, like Ukraine, Poland, and Romania, the question arises what role the transformation of the economy and the resulting innovation linkages have played in these countries. This paper addresses this issue by exploring the impact of economic and institutional dimensions on the development of CEE countries, thereby explicitly distinguishing between European Union (EU) members and non-members. First of all, the performance development of the Gross Domestic Product (GDP) of the CEE countries and Western European countries is observed. In a further analysis step, the development of EU members is compared with that of CEE countries that are non-members of the EU. This paper estimates the impact of such factors as innovation, institutions, and political practices on the economic development of 37 European countries for the period from 2000 until 2020 by using a panel regression. The results of the analysis show that institutions matter, especially for non-EU-member CEE countries. Stable institutions—such as freedom of the press, freedom of expression, but also high levels of the Human Development Index—help countries to achieve a higher income development over time. The role of the innovative ability of countries is also decisive for a positive development.