R&D Investments in the European ICT sector: Implications for Business Performance

Background: A significant share of business innovation arises from information and communication (ICT) sector. Business investment into research and development (R&D) activities can be seen as an important basis for innovation, which can further lead to better economic performance. This can be especially true for the ICT sector. Objectives: The paper examines the share of the ICT sector on innovation and the total R&D expenditure in selected European countries. Furthermore, our aim is to test the potential positive correlation between R&D expenditure, productivity and the value added in the sector. Methods/Approach: The goals of the paper has been tested by empirical data analysis using the pane regression analysis. We examined panel data for 24 European countries in the 2008-2016 period. Results: The highest share of business R&D expenditure in ICT has been captured in Nordic countries. Firms in ICT appear to be innovative above the average and represent a significant share in the total business R&D expenditure. Conclusions: We found a positive correlation between R&D expenditure and both value-added and apparent labour productivity in the ICT sector. We believe that this could be to some extent attributed to the innovation of products and processes. Hence, the government support in the form of R&D tax incentives can be also beneficial for the economic performance of ICT firms.