Cooperation Between Ukraine and the EU Towards Innovation-Driven Economic Development

Theoretical Framework

It is generally acknowledged that innovation underpins productivity and lay at the heart of economic growth. A large and growing body of literature has investigated a strong association between innovation¹ and long-run economic performance (Solow (1957), Romer (1990), Krugman (1991), Grossman & Helpman (1991)), while also recognizing peculiar role of institutional arrangements in economic growth (North and Thomas (1973), Sala-i-Martin (2002), Tebaldi and Elmslie (2008)) and innovation-driven economic development (Hage and Hollingsworth (2000), Edquist (1997), Langlois and Robertson (1995)).

The concept of National innovation system (NIS) helps to study innovation development occurring within an economic system as the “result of a complex set of relationships among actors”, such as enterprises, universities and government (OECD, 1995). NIS definitions vary: for example, according to Freeman NIS is a “network of institutions in the public and private sectors whose activities and interactions initiate, import, modify and diffuse new technologies” (Freeman, 1987, p.1); and according to Lundvall, NIS can be defined as “elements and relationships which interact in the production, diffusion and use of new, and economically useful, knowledge” (Lundvall, 1992, p. 12).