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

Author

Listed:
  • Tomasz Kijek

    (Maria Curie-Sklodowska University, Poland)

  • Anna Matras-Bolibok

    (Maria Curie-Sklodowska University, Poland)

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.

Suggested Citation

  • Tomasz Kijek & Anna Matras-Bolibok, 2019. "The relationship between TFP and innovation performance: evidence from EU regions," Equilibrium. Quarterly Journal of Economics and Economic Policy, Institute of Economic Research, vol. 14(4), pages 695-709, December.
    • Handle: RePEc:pes:ierequ:v:14:y:2019:i:4:p:695-709
    DOI: 10.24136/eq.2019.032
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    Cited by:

    1. Li, Lei & Luo, Changtuo, 2023. "Does administrative decentralization promote outward foreign direct investment and productivity? Evidence from China," Economic Modelling, Elsevier, vol. 124(C).
    2. Rolando Rubilar-Torrealba & Karime Chahuán-Jiménez & Hanns de la Fuente-Mella, 2022. "Analysis of the Growth in the Number of Patents Granted and Its Effect over the Level of Growth of the Countries: An Econometric Estimation of the Mixed Model Approach," Sustainability, MDPI, vol. 14(4), pages 1-12, February.
    3. Yonghong Ma & Huili Ni & Xiaomeng Yang & Lingkai Kong & Chunmei Liu, 2023. "Government subsidies and total factor productivity of enterprises: a life cycle perspective," Economia Politica: Journal of Analytical and Institutional Economics, Springer;Fondazione Edison, vol. 40(1), pages 153-188, April.
    4. Wioletta Wierzbicka, 2021. "Differentiation in levels of human capital among small cities in Warminsko-Mazurskie Voivodship," Entrepreneurship and Sustainability Issues, VsI Entrepreneurship and Sustainability Center, vol. 9(2), pages 209-222, December.
    5. Michał Bernard Pietrzak & Bartłomiej Igliński & Wojciech Kujawski & Paweł Iwański, 2021. "Energy Transition in Poland—Assessment of the Renewable Energy Sector," Energies, MDPI, vol. 14(8), pages 1-23, April.
    6. Bartłomiej Iglinski & Karol Flisikowski & Michał Bernard Pietrzak & Urszula Kiełkowska & Mateusz Skrzatek & Anas Zyadin & Karthikeyan Natarajan, 2021. "Renewable Energy in the Pomerania Voivodeship—Institutional, Economic, Environmental and Physical Aspects in Light of EU Energy Transformation," Energies, MDPI, vol. 14(24), pages 1-27, December.
    7. Cai, Meng & Cui, Riming & Li, Dan, 2023. "Trade with innovation benefits: A re-appraisal using micro data from China," Journal of Asian Economics, Elsevier, vol. 89(C).
    8. Michał Bernard Pietrzak & Marta Kuc-Czarnecka, 2022. "Transformation of Energy Markets: Description, Modeling of Functioning Mechanisms and Determining Development Trends," Energies, MDPI, vol. 15(15), pages 1-6, July.
    9. Elżbieta Bukalska & Marek Zinecker & Michał Bernard Pietrzak, 2021. "Socioemotional Wealth (SEW) of Family Firms and CEO Behavioral Biases in the Implementation of Sustainable Development Goals (SDGs)," Energies, MDPI, vol. 14(21), pages 1-15, November.
    10. Magdalena Kludacz-Alessandri & Małgorzata Cygańska, 2021. "Corporate Social Responsibility and Financial Performance among Energy Sector Companies," Energies, MDPI, vol. 14(19), pages 1-16, September.
    11. Li He & Jian’ge Tao & Ping Meng & Dan Chen & Meng Yan & Lászlo Vasa, 2021. "Analysis of socio-economic spatial structure of urban agglomeration in China based on spatial gradient and clustering," Oeconomia Copernicana, Institute of Economic Research, vol. 12(3), pages 789-819, September.
    12. Hongjun Sun & Zuoxiang Zhao & Ding Han, 2024. "Growth Models and Influencing Mechanisms of Total Factor Productivity in China’s National High-Tech Zones," Sustainability, MDPI, vol. 16(8), pages 1-19, April.
    13. Kamil Decyk, 2021. "Service Sector Productivity in the European Union Member States," European Research Studies Journal, European Research Studies Journal, vol. 0(Special 3), pages 185-202.

    More about this item

    Keywords

    TFP; innovation; knowledge spillovers; EU regions;
    All these keywords.

    JEL classification:

    • R11 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Regional Economic Activity: Growth, Development, Environmental Issues, and Changes
    • R12 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Size and Spatial Distributions of Regional Economic Activity; Interregional Trade (economic geography)
    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes
    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence

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