Knowledge spillovers, innovation activities and competitiveness of industries in eu member and candidate countries

The impact of innovation activities on performance and competitiveness of firms, industries and nations has been a matter of considerable interest over the past few decades. The existing empirical work has widened our knowledge of the complexity of the innovation process and its impact on the ability of firms to compete. This study investigates how knowledge spillovers generated through innovation activities of firms affect the ability of their industries to compete in terms of quality. We utilise the data from the Community Innovation Survey 2006 for several EU member and candidate countries which has recently become available and combine it with other EU wide datasets to create an industry database containing information on innovation activities, and performance at industry level. We use a simultaneous equations framework to examine the interdependencies between knowledge spillovers, innovation activities, quality upgrading and market share of industries from the selected countries on the single European market. The results of our work provide support for the relationship between innovations, quality upgrading and market share of industries and point to several types of spillovers which are relevant for competitiveness of national industries in EU member states.