The Impact of Services Sub-Sectors on the Innovation Performance of Eastern European Countries


Many studies have shown that the services sector has grown rapidly recently and has contributed positively to the current productivity and growth rates in today’s economies. However, these findings are insufficient to explain the contributions of services sector developments to the dynamics of the economy. Firstly, it would be more appropriate to associate developments in the services sector with the increase in innovation activities, which is an important feature of the economy, instead of associating them with current productivity and growth rates. Secondly, instead of considering the developments in the services sector as a whole, it would be a more accurate approach to divide them into subgroups and examine their effects on the economy. Accordingly, we aimed to examine the effects of services sub-sectors on the innovation performance of 13 Eastern European countries using panel data analysis for the period of 2000-2017. Our empirical findings revealed that the impact of services sub-sectors on the innovation performance of Eastern European countries varies. Only the knowledge-intensive business services (KIBS) sub-sector has contributed to the innovation performance of the Eastern European area. Thus, these empirical results indicated important implications for innovation-oriented economic growth policies based on the promotion of the KIBS sub-sector in Eastern European countries.

Keywords: services sectors, knowledge-intensive business services, innovation, Eastern European countries.

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