R&D in Europe: Sector Decomposition of Sources of (in)Efficiency

Measuring the efficiency of research and development (R&D) expenditure and innovation policy has gained attention in recent years. This research examines the efficiency of 29 selected European countries for the period ranging from 2007 to 2017 in achieving and obtaining R&D goals. The methodology applied is the data envelopment analysis approach with the inclusion of the missing data approach. The contributions of this research include the following: dynamic analysis is conducted to track changes of (in)efficiencies over time; the decomposition of the efficiency is done by separating the main variables of interest into the private, higher education, and government sectors; and the robustness of the results is evaluated, which is often ignored in the literature. The results of the analysis are discussed with possible directions for inefficient countries. The rankings provided in the empirical part of the study confirm previous findings on disparities between the European countries with respect to innovation and the R&D sector.