A Study of the Impact of Relationship between Research and Development Spending and Industrial Value Added in the European Union for the Period (1990 –2023) According to the VAR Model

Abstract

In light of rapid technological advancements, the ability to generate high industrial added value has become heavily dependent on utilizing and integrating research and development (R&D) outputs into the production process. This study aimed to analyze the relationship between R&D spending and the added value of the industrial sector in European Union (EU) countries during the period 1990-2003. It focused on the dynamic interactions between the two variables and employed a vector auto regression (VAR) model as a suitable standard framework for analyzing the interrelationships. A range of statistical tests The results showed a statistically significant positive relationship between R&D spending and industrial added value, with the possibility of reciprocal causal effects. Higher levels of spending contributed to enhancing the industrial sector's ability to generate high economic value, reflecting the pivotal role of knowledge investment in supporting industrial performance. The study also revealed a clear disparity in R&D spending levels among EU countries, which leads to differences in added value levels. The study recommends developing a comprehensive dynamic analysis to help bridge the research gap concerning the study of this relationship within the EU context.  The European Union over a long period of time, providing policymakers with indicators on the role of investment, supporting industrial performance, and promoting sustainable economic growth