Young Leading Innovators and the EU's R&D Intensity Gap
Posted: 15 Dec 2012
Date Written: August 28, 2012
Europe’s innovation gap relative to the US is often attributed to its industrial structure in which new firms do not play a significant role, especially in high-tech sectors. This view of a structural EU innovation deficit is popular in European innovation policy discussions, but has received little or no thorough empirical investigation. This paper aims to address this ‘evidence gap’. Using industrial R&D Scoreboard data from leading world innovators, we find that compared to the US, the EU has fewer young firms among its leading innovators. Using a decomposition analysis, we show that having fewer young firms accounts for about one third of the EU-US differential in R&D intensity, while fifty five percent of the differential is due to the fact that young leading innovators in the EU are less R&D intensive than their US counterparts. Further analysis shows that this is almost entirely due to a different sectoral composition. We thus confirm that the EU-US private R&D gap is indeed mostly a structural issue.
Keywords: dynamics of firms, age of firms, EU-US R&D gap
JEL Classification: O32
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