Innovation Benefits from European Union Ascendancy: An Econometric Analysis.

Nguyen, Lisa

This paper investigates the benefits of joining the European Union (EU) and its impact on innovation for two indicators: patents and R&D expenditure. Based on a sample size of 27 countries within the EU observed over the time period 1996 to 2013 and utilising the GMM, FE and OLS models, I showed that, overall, entry into the EU has provided substantial benefits. Nevertheless, not all of the indicators of EU benefits are significant and sometimes did not provide positive impact on innovative activities. My evidence also suggests that with a further breakdown into two different regions, Western and Eastern Europe, there is a further rift in gains. Financial integration, for starters, has had a negative impact on innovation for both Western and Eastern Europe. Nevertheless, for the entire EU, financial integration has a positive impact on the number of patents filed. I also showed that another benefit of joining the EU, free movement of labour, has a negative and significant effect on both innovative indicators. This is consistent with the idea not all benefits of the EU provide a positive impact on innovation. Further research is warranted due to the insufficient time period.

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