The Influence of Research & Development Policy on Business-Sector Performance: The Baltic States in the EU

Abstract

The success of business-sector research and development (R&D) activities and innovation performance is dependent on general development conditions (path dependency), but also on the efficiency of public R&D policy measures, which supports business-sector R&D activities directed towards innovation. In the current article we present a holistic approach based on macro-quantitative analysis for characterizing the role of the public sector in shaping business-sector R&D activities and innovation performance. The influence of R&D policy on business-sector R&D activities in EU member states (and countries closely associated with them) will be empirically analyzed with the combined methods of principal component analysis and multiple regression analysis. The goal of the article is to explore new possibilities of the macro-quantitative approach for policy-influence analysis and to assess on the basis of constructed models the situation in the Baltic States, which have, after the transformation from command to market economy, chosen different approaches to R&D policy. The article reports on the following research tasks: (1) an analysis of the role (needs and opportunities) of R&D policy for shaping business-sector R&D activities and innovation performance; (2) a presentation of the new opportunities to develop the macro-quantitative modelling of R&D policy influence through the combination of principal component analysis (PCA) and multiple regression analysis methods; and (3) an assessment of the results of R&D policy influence on business-sector R&D activities and innovation performance in the Baltic States, based on constructed statistical models. Data from 2004, 2006, 2008, and 2010 has been used. Large discrepancies can be found in both theoretical and empirical approaches to the formation of business-sector R&D activities and innovation performance. In the current study, available theoretical studies are systematized, the solution for some statistical modelling problems in available empirical studies is demonstrated, and finally, the assessment of the influence of R&D policy on the business sector in small Baltic States is provided in comparison to the sample of investigated countries.