Lobbying and innovation in the European Union

Abstract

AbstractAside from anecdotal evidence, lobbying activities and the role of vested interests in the EU have not been scrutinized. This article attempts to cast focus on the relationship between lobbying and aspects of innovation in the EU. The modest performance of the EU compared to the innovation frontier has been attributed to an array of factors, one of which is the adverse effect of vested interests. The lack of new, innovative enterprises has been identified as a decisive factor behind the productivity stagnation and lobbying by incumbents poses as a credible culprit. In this article, I create a novel firm‐level database through the cross‐fertilization of data from the growing Transparency Register (EC and EP), AMADEUS (BvD), the OECD, Eurostat, and the European Commission in order to address the complex relationship between vested interests, innovation, and competition. The preliminary findings indicate that more R&D intensive firms tend to spend significantly larger amount of funds on lobbying, primarily competing for EU grants and government procurement. Using data for country‐sector concentration, I find that the relationship is stronger in the presence of low competition. Despite the improvements required in the documentation of lobbying activities, these results provide preliminary tangible evidence on the effect of vested interests on innovation performance.