There is debate around whether Europe faces an innovation crisis compared to countries like the US. The document explores this issue from an institutional perspective, focusing on differences between coordinated market economies (CME) like those in Europe versus liberal market economies (US). CMEs emphasize incremental innovation within existing industries while LMEs encourage more radical innovation that disrupts existing industries. While the US performs stronger in radical innovation, Europe maintains comparative institutional advantages for incremental innovation in large companies. Rather than deregulation, the document suggests Europe could foster more innovation through targeted re-regulation of small companies and labor policies.

1. Is there a European Innovation crisis?
Armend Muja
International Conference on Business and
Technology

2. 1. Introduction
European Paradox - prosperity without
innovation?
Why is that Europe did not match US in
innovation?
Approach: a institutional (Voc) perspective in
innovation: incremental vs radical innovation
Comparative institutional advantage

3. Global Innovation performance (2006-
2013)
0
20
40
60
80
100
120
140
2006 2007 2008 2009 2010 2011 2012 2013
US
EU
Japan
China
Russia

4. 2. Radical vs incremental innovation
Radical innovation
 Substantial shifts in
goods and product lines
 Development of entirely
new goods
 Major changes in the
production process
 High risk, greater
changes of default
(Microsoft, Google)
Incremental innovation
 Incremental shifts in
product lines
 Incremental improvement
of existing products
(machinery, engines,
households products)
 Low risk, lower rate of
default
 Market leaders: Bosch,
BMW

5. Explaining differences in US-Europe in
innovation schemes
Comparative institutional advantage (VOC) – a
useful tool to explain the differences
Coordinated market economies (Europe) vs
liberal market economies (US)
CME characterized by coordinated wage
arrangements and skilled labour and incremental
skilling in the workplace
LME characterized by deregulated wage, general
skills and radical skilling in the education sector

6. Will deregulation foster innovation?
CME Europe needs to maintain its institutional
competitive advantage
No deregulation, but re-regulation
Preserve the institutional set-up for big and
incremental companies, re-regulate small
companies and labour
Europe bests US in incremental innovation

7. Innovation/Wage coordination
119
116
115
112
108
110
112
114
116
118
120
Innovation
67.5
57.2
67
69
0
10
20
30
40
50
60
70
80
Trade Union density

8. Thank you!
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