The determinants of innovative capacity in the medical sector in Central Europe and across the European Union
Abstract
The recent COVID-19 crisis, as well as the resulting international response, have demonstrated the importance of medical innovation in meeting current and future health challenges. Yet capacity for innovation differs from country to country, and policymakers are wise to find ways to increase each nation’s ability to generate new solutions. This study examines medical innovation, measured as patents per capita, for 27 EU countries from 2004 to 2018. Modelling innovation as a function of international and domestic macroeconomic variables, government and private-sector R&D, the rate of return to physical and human capital, and a measure of risk, a dynamic panel analysis finds that real-exchange-rate volatility reduces patent applications for some countries, particularly in Central and Eastern Europe. The response to the explanatory variables differs by countries’ overall innovation levels, with innovation in weaker innovators reduced by risk and increased by higher education levels. In stronger innovators, the internal rate of return most strongly drives innovation, suggesting that this process more closely resembles “traditional” investments.
First published online 15 November 2022
Keyword : medical innovation, innovative capacity, sectoral innovation system, European Union, Central and Eastern Europe
How to Cite
Hegerty, S. W., & Weresa, M. (2023). The determinants of innovative capacity in the medical sector in Central Europe and across the European Union. Technological and Economic Development of Economy, 29(1), 74–90. https://doi.org/10.3846/tede.2022.17737
This work is licensed under a Creative Commons Attribution 4.0 International License.
References
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Clark, J., Freeman, C., & Soete, L. (1981). Long waves, inventions, and innovations. Futures, 13(4), 308–322. https://doi.org/10.1016/0016-3287(81)90146-4
Consoli, D., & Mina, A. (2009). An evolutionary perspective on health innovation systems. Journal of Evolutionary Economics, 19, 297–319. https://doi.org/10.1007/s00191-008-0127-3
Di Pietro, G., Biagi, F., Dinis Mota Da Costa, P., Karpinski, Z., & Mazza, J. (2020). The likely impact of COVID-19 on education: Reflections based on the existing literature and recent international datasets. Publications Office of the European Union, Luxembourg.
Doyle, E., & O’Connor, F. (2013). Innovation capacities in advanced economies: Relative performance of small open economies. Research in International Business and Finance, 27(1), 106–123. https://doi.org/10.1016/j.ribaf.2012.08.005
Dziallas, M., & Blindt, K. (2019). Innovation indicators throughout the innovation process: An extensive literature analysis. Technovation, 80–81, 3–29. https://doi.org/10.1016/j.technovation.2018.05.005
European Commission. (2018). European Innovation Scoreboard 2018. EIS. Publications Office of the European Union, Luxembourg. Retrieved August 13, 2021, from https://data.europa.eu/doi/10.2873/66501
European Commission. (2021). European Innovation Scoreboard 2021. EIS. Publications Office of the European Union, Luxembourg.
Francois, P., & Lloyd-Ellis, H. (2003). Animal spirits through creative destruction. American Economic Review, 93(3), 530–550. https://doi.org/10.1257/000282803322156972
Frankovic, I., Kuhn, M., & Wrzeszczak, S. (2020). Medical innovation and its diffusion: Implications for economic performance and welfare. Journal of Macroeconomics, 66, 103262. https://doi.org/10.1016/j.jmacro.2020.103262
Furman, J. L., Porter, M. E., & Stern, S. (2002). The determinants of national innovative capacity. Research Policy, 31(6), 899–933. https://doi.org/10.1016/S0048-7333(01)00152-4
Furman, J. L., & Hayes, R. (2004). Catching up or standing still? National innovative productivity among “follower” countries, 1978–1999. Research Policy, 33(9), 1329–1354. https://doi.org/10.1016/j.respol.2004.09.006
Grebel, T., & Wilfer, T. (2010). Innovative cardiological technologies: A model of technology adoption, diffusion and competition. Economics of Innovation and New Technology, 19(4), 325–347. https://doi.org/10.1080/10438590802482019
Griliches, Z. (1990). Patent statistics as economic indicators: A survey. Journal of Economic Literature, 28(4), 1661–1707. http://www.jstor.org/stable/2727442
Holton, G. A. (2004). Defining risk. Financial Analysts Journal, 60(6), 19–25. https://doi.org/10.2469/faj.v60.n6.2669
Hong, J., Hong, S., Wang, L., Xu, Y., & Zhao, D. (2015). Government grants, private R&D funding and innovation efficiency in transition economy. Technology Analysis & Strategic Management, 27(9), 1068–1096. https://doi.org/10.1080/09537325.2015.1060310
Hsu, P.-H., Tian, X., & Xu, Y. (2014) Financial development and innovation: Cross-country evidence. Journal of Financial Economics, 112(1), 116–135. https://doi.org/10.1016/j.jfineco.2013.12.002
Hu, M.-C., & Mathews, J. A. (2005). National innovative capacity in East Asia. Research Policy, 34(9), 1322–1349. https://doi.org/10.1016/j.respol.2005.04.009
Jeon, S.-H., & Pohl, R. V. (2019). Medical innovation, education, and labor market outcomes of cancer patients. Journal of Health Economics, 68, 102228. https://doi.org/10.1016/j.jhealeco.2019.102228
Kelly, B., Papanikolaou, D., Seru, A., & Taddy, M. (2020). Measuring technological innovation over the long run (National Bureau of Economic Research, Working Paper 25266). Cambridge, MA. http://www.nber.org/papers/w25266
Ketels, C., & Clinch, J. P. (2020). Acting now while preparing for tomorrow: Competitiveness upgrading under the shadow of COVID-19 (ISC Working Paper, April 29). Institute for Strategy and Competitiveness. Harvard Business School.
Knight, F. (1964). Risk, uncertainty and profit. Augustus M. Kelley.
Kravtsova, V., & Radosevic, S. (2012). Are systems of innovation in Eastern Europe efficient? Economic Systems, 36(1), 109–126. https://doi.org/10.1016/j.ecosys.2011.04.005
Levaggi, R., & Pertile, P. (2020). Which valued-based price when patients are heterogeneous? Health Economics, 29(8), 923–935. https://doi.org/10.1002/hec.4033
Malerba, F. (2005). Sectoral systems of innovation: A framework for linking innovation to the knowledge base, structure and dynamics of sectors. Economics of Innovation and New Technology, 14(1–2), 63–82. https://doi.org/10.1080/1043859042000228688
Malik, S. (2020). Macroeconomic determinants of innovation: Evidence from Asian countries. Global Business Review, 1–15. https://doi.org/10.1177/0972150919885494
Mensch, G. (1979). Stalemate in technology: Innovations overcome the depression. Cambridge, MA: Ballinger.
Moro, M. A., Andersen, M. M., Smets, B. F., & McKnight, U. S. (2019). National innovative capacity in the water sector: A comparative assessment between China and Europe. Journal of Cleaner Production, 210, 325–342. https://doi.org/10.1016/j.jclepro.2018.10.329
Nagaoka, S., Motohashi, K., & Goto, A. (2010). Patent statistics as an innovation indicator. In H. Bronwyn & N. Rosenberg (Eds.), Handbook of the economics of innovation (vol. 2, pp. 1083–1127). Elsevier. https://doi.org/10.1016/S0169-7218(10)02009-5
Pavitt, K. (1985). Patent statistics as indicators of innovative activities: Possibilities and problems. Scientometrics, 7(1–2), 77–99. https://doi.org/10.1007/BF02020142
Radosevic, S., Yoruk, D. E., & Yoruk, E. (2019). Technology upgrading and growth in Central and Eastern Europe. In G. Gorzelak (Ed.), Social and economic development in Central and Eastern Europe. Stability and Change after 1990 (pp. 178–204). Routledge. https://doi.org/10.4324/9780429450969
Rosa, E., Renn, O., & McCright, A. (2014). The risk society revisited: Social theory and governance. Temple University Press.
Schumpeter, J. (1950). Capitalism, socialism and democracy (3rd ed.). Allen & Unwin.
Stojčić, N. (2021). Collaborative innovation in emerging innovation systems: Evidence from Central and Eastern Europe. The Journal of Technology Transfer, 46, 531–562. https://doi.org/10.1007/s10961-020-09792-8
van de Wetering, G., Woertman, W. H., & Adang, E. M. (2012). Time to incorporate time in cost-effectiveness analysis. The European Journal of Health Economics, 13, 223–226. https://doi.org/10.1007/s10198-011-0374-3
Willemé, P., & Dumont, M. (2015). Machines that Go “Ping”: Medical technology and health expenditures in OECD countries. Health Economics, 24(8), 1027–1041. https://doi.org/10.1002/hec.3089
Willet, A. (1951). The economic theory of risk and insurance. University of Pennsylvania Press. https://doi.org/10.9783/9781512808995
Zang, L., Xiong, F., Lao, X., & Gao, Y. (2019). Does governance efficiency matter for national innovative capacity? One tale from different countries. Technology Analysis & Strategic Management, 31(2), 239–252. https://doi.org/10.1080/09537325.2018.1493450