Innovation expenditures efficiency in Central and Eastern European Countries

efficiently in CEE countries. Nowadays, innovativeness is one of the most crucial
factors accelerating economic growth. Increasing innovativeness is particularly
important for developing countries, where policymakers are implementing various
innovation strategies. The Europe 2020 strategy sets the target of 3% GDP for R&D
spending. Many studies emphasize a significant effect of increasing expenditures on
R&D on economic growth, but an efficiency aspect has not been covered in the
literature. The article is based on critical review of the main literature of the subject
and own empirical studies. The statistical data is sourced from the main international
statistics. Calculations were performed using DEA methodology. DEA methodology
allows assessing input-output efficiency. Inputs indicator is the annual public and
private spending on R&D (as % GDP). There are nine output indicators, which
represent available innovative statistics about number of patents, high-tech
production etc. Number of variables was reduced for each period using correlation
coefficient analysis, which allowed identifying the significant variables with least
loss of information. The efficiency is calculated as the ratio of the weighted sum of
the outputs by the weighted sum of inputs. The calculations are carried out based on
the Excel spreadsheet and DEAFrontier. The paper gives a general review of the
innovation level in CEE countries compared to other EU members which are
spending less than 2% of GDP on R&D. The analysis shows that among CEE
countries, the closest to efficiency frontier are Romania and Slovakia. Hypothesis
that increasing spending on innovations is not causing proportional effects has been
confirmed for CEE region, but not for western economies, which are spending on
R&D more effectively. Main conclusion of the research is that innovation spending
should be increased gradually in aim to achieve optimal results. This research may
contribute to discussion on innovation policy design, and can be used by policy
makers to develop national innovation strategies.