INNOVATION POTENTIAL: IMPACT ON THE NATIONAL ECONOMY’S COMPETITIVENESS OF THE EU DEVELOPED COUNTRIES

Abstract

The success of the economy of each country is determined by its innovation development. The purpose of the paper is to investigate the essence of innovation potential and its role in providing the national economy’s competitiveness under the conditions of technological changes on the example of the European Union developed countries. The subject of research is the innovation potential of Austria and Germany. Methodology. The study is based on a comparative analysis of approaches to determination and evaluation of innovation potential in specialized economic literature. Analysis and synthesis and the system approach were used to outline the entity of innovation potential, to explore and structure its elements in the context of providing the national economy’s competitiveness. The quality and quantity analysis were used to discover general characteristics of the EU countries’ innovation development, special aspects of the national innovation systems of Austria and Germany, the role of innovation potential in the national economies competitiveness of these countries. The method of mathematical modelling in economics, in particular, regression analysis based on annual data for the period from 1995 to 2015, was applied to assess the impact of innovation potential on the Austria and Germany competitiveness. The absolute value of GDP and the share of export of goods and services in GDP are used as a dependent variable. Elements that characterize the country’s innovation potential were used as independent variables: the share of researchers in R&D of total population, the share of labour force with advanced education of total working-age population with advanced education, expenditure on tertiary education as a percentage of GDP, R&D expenditure as a percentage of GDP, patent applications as a percentage of total population. Results of the survey of theoretical works showed that the most multifaceted and comprehensive approach to determining the essence and elements of innovation potential is the “Resources-Results” approach. This very approach was used for empirical analysis of Austria and Germany’s innovation potential and evaluation of its impact on the national economic competitiveness of these countries. It has been found that the greatest impact on the development of Germany’s national economy is provided by: scientific resources, financial and economic resources, human resources. The most important elements of Austria’s innovation potential are financial and economic resources, scientific resources, human resources, as well as the effectiveness of innovation. Generally, the results of the empirical study show a significant contribution of innovation potential to the national economy’s competitiveness of the EU developed countries. It was revealed that a pivotal role in the implementation of innovation potential belonged to the state and its efficient innovation policy. Practical implications. Elements of innovation potential (that has a positive effect upon Austria and Germany’s economic development) indicate differences in the general characteristics and efficiency of national innovation policy. This allows us to determine and ground the main directions of innovation policy to increase innovation potential efficiency. It was revealed that Austria should adjust its education policy: education system should be more oriented towards the R&D development and its implementation in the economy. Germany should improve an efficiency of innovation policy (especially in export-oriented industries) and the effectiveness of implementing the R&D results in the economy, optimize education and employment policies. Value/originality. The obtained results can be used for further developing and improving the investment policy of Germany and Austria. Further research of separate resources and elements of innovation potential will allow expanding the opportunities for the national economy competitiveness increasing that is important in the context of tougher international competition.