Innovation and economic performance in the EU: an integrated framework for analysis

Abstract

Innovations are important for the economic growth, but such impact varies significantly across regions and the EU countries. Existing researches often adopt a sectoral perspective, overlooking the long- term effects of innovations and the need for a comprehensive framework to measure its influence on GDP. Addressing this gap, the study proposes an integrated methodology to identify the relationship between business innovations and economic performance across EU countries. Using three-step integrated methodology the research begins with identification and refinement of datasets on business innovation and GDP, applying Forward Feature Selection method to revise 43 indicators. In the second step, econometric techniques, including Principal Component Analysis are employed to explore the relationship between business innovations indicators and GDP growth. Finally, delivered cluster analysis using k-means identifies groups of EU countries following their innovation activity and GDP growth rates, highlighting those that with innovation ecosystems outperform the EU average. Findings show significant disparities in the impact of innovation on GDP growth in the EU countries, showing the existence of regional inequalities. Results underline the necessity for adopted policy frameworks that aim to strengthen innovation ecosystems and promote equitable economic growth. This study provides actionable insights for policymakers supporting faster innovation-driven applications within the EU. First published online 21 September 2026