R&D Efficiency and Business Sector Spending in European Regions: Lessons From the Conditional Efficiency Approach

This study investigates the relationship between business R&D spending and R&D efficiency across 256 European regions. Using patent applications and publications as outputs and overall R&D expenditure as input, the analysis reveals significant efficiency disparities between and within countries. The Netherlands boasts top performers, while Greece and Eastern Europe lag. To shed light on these differences, a fully nonparametric conditional efficiency approach is applied to study the relationship between R&D efficiency and the share of the business sector in total R&D spending. Results indicate an optimal business R&D share of around 61%, beyond which efficiency declines.