CEE's Innovation Crossroads: From Catch-Up to Creative Leadership
Central and Eastern European (CEE) nations have achieved remarkable economic convergence with Western Europe since joining the EU. The region’s two-decade sprint from post-socialist economies to the EU’s high-tech factory floor was breathtaking. But the growth model of being the “extended workbench” for Western industry is hitting a hard ceiling. The strategy of making things is no longer enough. The future belongs to those who create them.
This requires a Copernican revolution in strategy – from imitation to invention, and that journey starts in one place: the laboratory. True, sustainable innovation isn’t just about slick software and new apps; it’s the final step in a long, arduous process that begins with basic science. This is the high-risk, long-term, foundational research that generates new knowledge. It’s the wellspring from which all future technology flows. The CEE governments must acknowledge this fact and shift their investment focus from infrastructure (or social spending) to financing science and innovation.
The headline numbers are bad enough. Not a single CEE country hits the EU’s 3% GDP R&D investment target (sic!), with only one exceeding the rather modest level of 2%. The bottom of the EU spending league is a CEE club: Romania (0.52%), Bulgaria (0.79%), and Latvia (0.82%) are investing fractions of what’s needed.
But the whole story is not just how much money is spent (not enough), but also how:
- The private funding gap:
In healthy ecosystems, governments fund the risky, early-stage basic research, and the private sector takes over to commercialize it. In CEE, this is dangerously inverted. Businesses are chronically underinvesting, spending just 0.8% of GDP on R&D – less than half the 1.8% average in Western and Northern Europe. To compensate, CEE governments are forced to prop up business R&D, funding 10% of it directly, more than double the 4.5% in the West.
- No connection between lab and market:
Even where public money is flowing into universities and research institutes, it’s hitting a dead end. The CEE region has pockets of scientific brilliance. Estonia, for instance, is a world-class performer, with 15.4% of its scientific papers ranking in the top 10% most-cited globally—placing it 4th in the entire EU. But this is where the pipeline breaks. This foundational knowledge is not being translated into economic value. This research is rarely translated into business success, however, due to a number of systemic failures and cultural factors.
There’s a chasm between academia and industry. The publicly funded research generates papers, not patents. The ideas are born in CEE labs but fail to cross the “valley of death” to become viable products. This is a systemic failure of technology transfer, entrepreneurial finance, and university-business collaboration. The result? A “dependent innovation” model where CEE is great at process optimization for foreign HQs but weak on creating its own foundational intellectual property.
The Verdict
Central & Eastern Europe is at a dangerous inflection point. Its strong human capital and manufacturing prowess are being squandered by a failure to invest in the entire innovation chain—from the patient, uncertain work of basic science to the aggressive, market-driven push of commercialization.
Without a radical commitment to funding its scientists and building the bridges for their discoveries to reach the market, the region risks being permanently stuck in the middle-income trap—forever assembling the future, but never inventing it.
Sources:
Research and development statistics at regional level – Statistics Explained – Eurostat
ec.europa.eu/eurostat/statistics-explained/index.php/Research_and_development_statistics_at_regional_level
R&D expenditure – Statistics Explained – Eurostat – European Commission
ec.europa.eu/eurostat/statistics-explained/index.php?title=R%26D_expenditure
Research and development expenditure by sector of performance – European Commission
ec.europa.eu/eurostat/databrowser/view/tsc00001/default/map?lang=en
Public and Private R&D Are Complements—Not Substitutes – CSIS
csis.org/analysis/public-and-private-rd-are-complements-not-substitutes
Growth and competitiveness in Central, Eastern and South-Eastern …
eib.org/attachments/lucalli/20240356_economics_working_paper_2025_01_en.pdf
Growth and competitiveness in Central, Eastern and South-Eastern …
eib.org/attachments/lucalli/20240356_economics_working_paper_2025_01_en.pdf
UK Science and Innovation Network summary: Estonia – GOV.UK
gov.uk/government/publications/estonia-uk-science-and-innovation-network-summary/uk-science-and-innovation-network-summary-estonia
Full article: Paths (not) taken: promoting R&D in Central and Eastern Europe
tandfonline.com/doi/full/10.1080/25739638.2024.2436799
Growth and competitiveness in Central, Eastern and South-Eastern …
eib.org/attachments/lucalli/20240356_economics_working_paper_2025_01_en.pdf
Full article: Paths (not) taken: promoting R&D in Central and Eastern Europe
tandfonline.com/doi/full/10.1080/25739638.2024.2436799
Full article: Paths (not) taken: promoting R&D in Central and Eastern Europe
tandfonline.com/doi/full/10.1080/25739638.2024.243
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