Regional disparities and innovations in Europe

The paper focuses on quantitative assessment of the innovation's role in explaining regional disparities and convergence in Europe. The empirical part of the study bases on the regional GDP pc and innovation indicators on the EU-27 NUTS2 level regions. Based on the selected set of initial innovation indicators for the 262 EU NUTS2 level regions and using the principal components factor analysis method, three composite indicators of regional innovation capacity are extracted. They explain around 80 % of the variation of the initial innovation indicators. The preliminary research results show that around 60% of variability of regional GDP per capita is explained by composite indicators of regional innovation performance and additional 20% are country specific factors. Estimating convergence equations, we noticed that regional innovations tend to increase inter-regional differences, at least during the short-run period. Thus, if regional income convergence is a policy target, additional policy measures beside innovation activities should be effectively implemented