The Consequences of the Great Recession for the R&D Share of Investment in the European Union

In this paper we investigate the medium term dynamics of the R&D share of total investment in the European Union over the Great Recession. Our results show that the crisis disclosed a dualism inside the EU, consisting of two dissimilar areas Core and Periphery, while in Central Eastern countries the crisis activated a peculiar pattern from which few early signs of convergence towards the Western side of the EU are recognizable. Only the Core turns out to be an integrated area in which credit markets, industrial base and R&D policy favoured a countercyclical reaction of the R&D share to the impact of the crisis. In both Periphery and Central Eastern countries the crisis did not prompt a relevant change in the composition of investment in favour of a higher share of innovation. However, while in the Periphery the pattern of the R&D share appears a forewarning signal for further divergence over the medium term, in the Central Eastern area the dynamics of the industrial base and the emergence of a sound relationship between innovation and credit in the period following the crisis, suggest that the response to the crisis laid the basis for a renewed process of accumulation.