A Socio-Economic Perspective on EU Integration
Science, Innovation, Technology and Entrepreneurship series
Edited by Elias G. Carayannis and George M. Korres
Chapter 8: Innovation, efficiency and economic integration
Nowadays, the economic role of innovation and efficiency enhancement in economic integration and convergence is even more important, taking into consideration the slowdown and the effects created by the current financial crisis. Within this framework, the key factors influencing the integration and convergence process are creation and diffusion of innovation, along with productive efficiency enhancement, mainly around three key areas: innovation and research, strengthening networks and clusters; and efficient use of production factors. Within this framework, when one considers productivity comparisons, an additional source of productivity change, called technical change, is possible. This involves advances in technology that may be represented by an upward shift in the production frontier. This is represented in Figure 8.1 by the movement of the production frontier from 0F0 to 0F1 in period 1. In period 1, all firms can technically produce more output for each level of input, relative to what was possible in period 0. When we observe that a producer has increased productivity from one period to the next, the improvement need not have been from efficiency improvements alone, but may have been due to technical change or the exploitation of scale economies, or from some combination of these three factors (Coelli et al., 2005).
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