Club Convergence in R&D Expenditure across European Regions

Abstract

The increasing disparities between European regions constitute a great challenge for sustainable development and require identification of the factors responsible for this process. Given the substantive role of R&D in shaping innovativeness and economic development, understanding its dynamics and spatial patterns can provide new insights into regional growth prospects. Although prior studies have investigated the patterns of innovation convergence, apparently none has attempted to test the convergence club hypothesis in R&D expenditure in the European regional scope. Therefore, the present study aims to fill this gap. The paper aims at examining the convergence path of R&D expenditure across European regions and at identifying the factors conditioning club membership. Data were retrieved from Eurostat’s regional database and Regional Innovation Scoreboard datasets over 2008–2018. Employing a nonlinear time-varying factor model, we reveal that R&D expenditure in the examined regions follows the pattern of club convergence. The results of our research allow to identify five convergence clubs characterised by distinct disparities in the R&D expenditures. We also demonstrate that the emergence of the identified convergence clubs might be attributable to the initial differences in human capital, external knowledge embedded in patents and technological structures across regions as measured by employment in medium-high and high-tech manufacturing and knowledge-intensive services. These results provide policy implications in terms of the formulation and implementation of more tailored innovation policies, based on smart development and specialisation strategies. The presence of business R&D convergence clubs requires shifting EU policy actions towards a more sustainable model promoting both the advantages of the strongest regions and the development opportunities in less-developed ones.