Innovation Efficiency in the EU Member Countries. A Data Envelopment Analysis (DEA) Approach

Innovation activities are a core component of strategies to foster competitiveness and tackle grand challenges such as climate change. Implementing innovation strategies has become more difficult in the wake of the economic crisis in Europe. Efficient use of resources is hence crucial. This study investigates innovation efficiency in the EU using a data envelopment analysis (DEA) approach. The results show that Austria could increase its innovation output without a corresponding increase in innovation inputs by 52 to 67 percent (IUS, variable returns to scale) or by 12 to 28 percent (WIFO indicators, variable returns to scale), respectively. Moreover, the strongest innovation performers (Innovation Leaders) are not always the most efficient countries, as demonstrated by Sweden and Finland which have room to improve their efficiency. However, any results should be interpreted with caution, as results are sensitive to the choice of innovation input and output indicators. The DEA approach also shows further drawbacks, such as the assumption of a linear (in contrast to a systemic) innovation process.