EIB Unveils Key Insights on Innovation Challenges and Opportunities in CESEE Region

Vienna Conference Spotlights Regional Growth and Competitiveness Amidst EU Innovation Goals.

At the Invisso Conference in Vienna, the European Investment Bank (EIB) released a pivotal working paper delving into the state of innovation across Central, Eastern, and South-Eastern EU (CESEE) countries. This comprehensive analysis highlights notable advancements in the region's innovation capacity over the last decade while addressing ongoing challenges critical to long-term competitiveness.

The report reveals that businesses in the CESEE region have doubled their R&D workforce and increased intellectual property investments from 10% to 12% of total investments over the past decade. Labour productivity has grown by 1.9% annually, outpacing growth in Northern and Western Europe. Despite these achievements, the region lags behind in several key areas:

• R&D Spending: CESEE businesses allocate just 0.8% of GDP to R&D, compared to 1.8% in Northern and Western Europe.
• Patent Activity: In 2023, the region filed only 1,600 patents with the European Patent Office, dwarfed by Germany’s nearly 25,000 filings.
• Innovation-Driven Sectors: Activity is primarily concentrated in manufacturing, ICT, and pharmaceuticals, with significant disparities in output and investment across firms and countries.

Labour and Capital Constraints

The CESEE region faces a severe skills shortage, which constrains innovation and growth potential. Many firms report difficulties in securing adequate risk capital and adopting cutting-edge technologies, issues further compounded by regional disparities in economic development.

"Convergence demands robust support for innovation investments, including enhancing R&D and worker skills across the CESEE region," remarked Kyriacos Kakouris, EIB Vice President. "Our collaboration with public and private stakeholders is vital to addressing these challenges and ensuring global competitiveness."

Strategic Policy Recommendations

EIB Chief Economist Debora Revoltella stressed the importance of targeted policies to bolster innovation ecosystems:

"Strengthening innovation is crucial for raising living standards and ensuring the CESEE region's competitive position. Our findings highlight the urgent need for policies focused on skill development and venture capital access to drive innovation-led growth."

Regional Growth and the Future of Innovation

The working paper underscores the role of research-intensive sectors in contributing to GDP growth. It also includes dashboards with country-specific innovation metrics, providing a granular view of regional disparities and areas of opportunity.

In a collaborative effort, the study is part of a joint initiative with the Oesterreichische Nationalbank (OeNB) and the Vienna Institute for International Economic Studies (wiiw). The findings align with broader EU goals for advancing regional competitiveness and innovation.

Looking Ahead

Labour shortages are encouraging some firms to relocate innovation activities within the CESEE region, particularly to less-developed areas. The EIB and its partners are committed to addressing these challenges through strategic investments and policy support, ensuring that the CESEE region can leverage its potential and contribute to the EU’s long-term economic resilience.

The full working paper is available here.