From Funding to Frontier: Public R&D and AI Innovation Across European Regions

Anastasios Evgenidis, Apostolos Fasianos, George Papapanagiotou and Nicholas Joseph Lazarou ()
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Nicholas Joseph Lazarou: European Commission - JRC, https://joint-research-centre.ec.europa.eu/index_en

No 2025-12, JRC Working Papers on Territorial Modelling and Analysis from Joint Research Centre

Abstract: Recent advances in Artificial Intelligence (AI) and the growing role of these technologies in enhancing productivity have attracted significant research and policy attention, yet the determinants of AI innovation remain relatively understudied. This study contributes to this emerging literature by examining the role of public R&D spending in fostering AI-related innovation across EU regions. Our analysis draws on bibliographic information from all patents registered at the European Patent Office (EPO) between 1980 and 2023. Using textual analysis of patent abstracts, we identify the share of AI patents among total patents and construct a novel dataset that allocates AI patents to NUTS-2 regions based on inventor addresses. This regional mapping enables us to assess the impact of public R&D funding on AI innovation while addressing endogeneity concerns by instrumenting regional public R&D spending with national defence-related R&D expenditure. The results show that public R&D plays a significant role in driving AI innovation: a 1% increase in public R&D spending raises AI patent output by approximately 0.27%. These findings speak directly to Europe’s innovation policy framework, providing evidence that public investment remains a powerful lever for stimulating AI development. They also reinforce the rationale for sustained funding under Horizon Europe, the Digital Europe Programme, and national innovation strategies aimed at building technological and reducing regional disparities in AI advancement.

Date: 2025-12
New Economics Papers: this item is included in nep-ain, nep-eec and nep-sbm
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Persistent link: https://EconPapers.repec.org/RePEc:ipt:termod:202512

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