Abstract

After decades of impressive growth, the new member states of the European Union are once again in transition, but this time from imitation to innovation-driven competitiveness. This paper evaluates the relationship between both public funding and public procurement for innovation (PPI) and firm-level innovation output and outcome additionality, in eight Central and Eastern European countries. Matching estimates on a sample of 41,623 firms suggest that PPI has a large effect on innovation and output, and the highest additionality is sometimes achieved when firms receive both financial support and innovation-oriented public procurement. We argue that policy-makers aiming to strengthen indigenous innovation capabilities should place stronger emphasis on PPI.