TRUST AND INNOVATION NEXUS AMONG THE EUROPEAN UNION MEMBER STATES

European Innovation Scoreboard uses data from the Eurostat's Community innovation survey to determine the state of the European Union's innovation and benchmark it with the rest of the world. European Union member states differ in their innovation performance across the variety of indicators. In the fast-paced global environment, innovation is important because it results in products and services of higher added value and leads to greater international competitiveness. Open innovation approach results in an increase in the speed of innovation and innovation performance. While the share of firms adopting open innovation is rising and inbound open innovation is a predominant mode of open innovation used, there is a stagnation in the intensity of collaboration for innovation purposes. This paper examines the role of trust in collaboration for innovation purposes between the European Union member states. Trust is important in collaboration because it decreases transaction costs, facilitates the flow of information, and cooperation accordingly, and enables a more efficient economic environment. Moreover, this study analyses the role of trust within different innovation ecosystems of the European Union member states. Its aim is to explain whether differences in trust can explain differences in collaboration for innovation purposes and innovation ecosystems between European Union member states. This study uses country data for the 28 European Union member states in the period 2010-2017. World Bank's Worldwide Governance Indicators' item Rule of law is used as a proxy for trust, while the Eurostat's Community Innovation Survey's indicators on linkages, research systems, innovation friendly environment, and finance and support are used as proxies for collaboration for innovation and innovation ecosystem. The analysis is meaningful from a policy perspective in the aspect of an increasing international competitiveness through a decrease in transaction costs in both public and private sectors.