National systems of innovation in the Eurozone: Policy implications for Spain

Abstract

This paper aims to understand which innovation inputs are more strongly related to innovation outputs in the Eurozone, and to derive policy implication for the Spanish convergence with Eurozone top players in terms of innovation. Drawing from the Global Innovation Index input-output framework we developed an alternative longitudinal index. The resulting country scores were used to construct a panel dataset composed of the 19 Eurozone members during the period 2013-2018, which were analysed through a series of multiple regression techniques. Results suggest a strong and positive influence of Business Sophistication on innovation outputs in Eurozone countries, derived mainly from the capacity of domestic firms to absorb knowledge. Possible implications for Spain could be derived from this fact, such as, for instance, encouraging inward foreign direct investment. Future research is needed to analyse the differentiated effects of such encouragement, as well as other surprising results of our study.