Academic journal article Public Finance and Management

The Influence of Research & Development Policy on Business-Sector Performance: The Baltic States in the Eu1

Academic journal article Public Finance and Management

The Influence of Research & Development Policy on Business-Sector Performance: The Baltic States in the Eu1

Article excerpt

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1. INTRODUCTION

The level of business-sector innovation performance is dependent on the base created by general development conditions (path dependency), the efficiency of government sector innovation policy measures, but also on the scale and success of business-sector research and development (R&D) activities. The objective of the government sector is to develop a complete and efficient national innovation system, where innovation policy supports business-sector R&D activities directed towards innovation. The task of innovation policy is to intermediate the relationships of organizations engaged in innovation (firms, government institutions, NGOs) using societal institutions (both intentionally created formal institutions and historically formed informal institutions). To shape the development framework for organizations, the innovation policy integrates the innovation-directed parts of various national policies (R&D policy, education policy, labor policy, budget and tax policy, etc.) into one comprehensive and systematic whole. States need to adopt a broad and holistic development approach to create the supportive macroeconomic environment (Bailey, Lenihan 2015).

R&D for innovation is considered the most important factor of economic development (Edquist, H. 2011; European Commission 2014). Business-sector R&D activities and innovation performance are successful in a country where a fully functional innovation policy support system has been developed, which also takes into account both the need for business-sector support and options for delivering that support. As a general base for the support of business-sector R&D activities, the development of government-sector R&D activities must be emphasized.

The current article comparatively analyzes the level and dynamics of government R&D policy together with business-sector R&D activities and innovation performance in EU member states and countries closely associated with them. It is difficult to assess the influence of policy measures on businesssector activities in a single country. Because of this, the dependency of business-sector R&D activities and innovation performance on government R&D policy in the current article relies on an international comparative analysis with the help of statistical modelling methods. When comparing the R&D activities of countries in the sample with the help of statistical modelling methods, we obtain a model assessment of each country's position in the international context based on chosen R&D indicators. We demonstrate how to compress the description of government policy measures and to raise substantially the robustness of multiple regression models wit h the help of principal component analysis (PCA). We demonstrate the analytical possibilities of macroquantitative approach used based on the Baltic States (Estonia, Latvia, and Lithuania)-which have, since transforming from command to market economies, implemented different R&D policies and achieved different results in business-sector R&D activities and innovation performance.

The goal of this article is to explore the possibility of a macro -quantitative analysis approach that will assess the position o f the Baltic States among EU member states and countries closely associated with them, based on the influence of R&D policy on business-sector R&D activities and innovation performance. This will establish a basis for understanding the long-term economic competitiveness of the Baltic States in the EU. To achieve the goal, the following research tasks will be tackled:

* analyze the role of the public sector in designing the conditions for business-sector R&D activities and innovation performance;

* describe the need for the government to support R&D activities in the business sector;

* demonstrate the possibility of macro-quantitative approach for modelling the influence of R&D policy on business-sector R&D activities in the sample of countries observed on the basis of a combination of PCA and multiple regression analysis methods;

* provide an empirical assessment of the international position of the Baltic States within the sample of countries observed, based on the models of the influence of R&D policy on business-sector R&D activities and innovation performance. …

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