The innovation gap between the EU and the US, even though decreasing in the past few years, still remains significant. Only five out of 27 EU members states - Sweden, Finland, Denmark, Germany and the UK – were named “innovation leaders” along with the US and Japan (European Innovation Scoreboard 2007). The causes of the different innovation performance among the EU and the US can be explained by the following factors: 1) nature and dynamics of the R&D investments; 2) differences in industrial structure of R&D; 3) degree of internationalization of R&D investments location; 4) character of linkage between inventions and the science base; 5) the value of venture capital investment; 6) geographical concentration of innovation activities, etc.
The most interesting and, perhaps, less discussed is the spatial structure of innovation gap in the EU and US regions. One of the differences between the EU and US regional innovation performance relates to the R&D spillover effects in the regions. The innovation performance of the EU regions is shaped more by interregional knowledge spillovers, whereas in the US, neighboring MSAs’ R&D expenditure doesn`t exert any significant influence upon innovation outcome of MSAs. In addition, a greater distance leads to the creation of self-contained innovative areas in the US.
The above mentioned causes of the innovation gap in the US and EU regions explain the leading positions of the US regions in regional competitiveness and innovation performance benchmarks and research outcomes (World Knowledge Competitiveness Benchmarks).
The first part of the paper aims at presenting the selected theoretical concepts explaining the role of innovation in building competitive advantage and sustaining growth. The second part of the paper analyses the differences between the two continents in terms of the major ‘inputs’ and ‘outputs’ of innovation. The third part is focusing on the geographical concentration of innovation activities in the US and EU. The paper ends with some concluding remarks and policy implications of the role of government in shaping the innovation potential of regions. The time period of analysis covers the years of 2000-2007. The empirical subject data, however, is constrained by the limited availability of comparable data at the sub-national level for the US and the EU. The geographical levels of analysis are metropolitan statistical areas (MSAs) for the US and NUTS level 2 regions for the EU.