Evaluating R&D performance of EU countries using categorical DEA

Over the coming decade, Research and Development (R&D) performance will be the key component of bringing innovation and the determinant of global competitiveness of nations. Therefore, this paper presents categorical Data Envelopment Analysis (DEA) for evaluating R&D performance of European Union (EU) countries. We utilise the output-oriented constant returns to scale (CRS) and variable returns to scale (VRS) DEA models with categorical data, namely, CAT-O-C and CAT-O-V models. In addition to DEA based framework, to examine the relationship between R&D performance and political-regulatory-economic situation of the countries; three research hypotheses are stated and their results are analysed. Policy implications about R&D activities can be derived for EU countries from the findings of this study.