Evidence on the Determinants of Foreign Direct Investment: The Case of Three European Regions

3.2.4 R&D and innovation expenditure

Another relevant variable for foreign direct investment is the R&D (research and development)
expenditure at regional level. Research and development effort captures the dynamism of a region by
looking at the resources it allocates to innovation activities. R&D is widely considered as a way to
foster economic growth. A general overview on the R&D spending at regional level (as % of GDP)
draws a first picture of the relative intensity of R&D effort at regional level. The data included in the
following table refers to the intramural R&D spending by the main three actors involved in R&D
investments: firms, government and universities (higher education).

Table 5: Total intramural R&D spending ( as % GDP)
(Source EUROSTAT - Calculus: Authors)

The table compares the distribution of the R&D investments for two years of reference (1995
and 2002). In all the categories of investments, Baden-Württemberg outperforms the other regions
although the level of R&D investment is relatively stable between 1995 and 2002. For Catalunya, we
can observe that the level of investment in 1995 is lower than in the other regions except in the higher
education sector. The figures for 2002 show a significant increase in that level in the business sector
and a more modest one in the higher education sector.

The involvement of the Catalan economy in sectors with medium-high technological (MHT)
contents is quite important. In that respect, Catalunya’s performance is as good as the others’. In
2000, according to the data published by Eurostat on the number of employees in MHT sectors,
Lombardia recorded 458,158 employees, Baden Württemberg 391,151 and Catalunya 223,791.

For our sample of regions, the following graph shows to what extent the size of human
resources in science and technology (as % of total population) is significant and constantly growing
over time.

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