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A Third of CEE Companies Invest in Product, Service Innovation, EIB Survey

Analysis

Photo by Pixabay

Investment activity is recovering in Central and Eastern Europe (CEE) after the crises caused by the coronavirus pandemic and the war in Ukraine, according to a survey by the European Investment Bank (EIB).

According to the survey, called "Business Model Update: Are CEE Companies Investing Enough?" companies are trying to break away from the old capital-intensive growth model and are looking for new opportunities in this regard, especially those related to the use of modern technologies and innovation. The level of investment in enterprises in the CEE region (77%) is close to the average in the European Union (80%) and the United States (81%).

EIB Vice-President Teresa Czerwińska remarked, "Investment by CEE enterprises in product and service innovation is higher than the EU average. This is a positive trend that will accelerate the development of the region, create new jobs, and certainly increase the region's competitiveness on the international market."

The main investment aim of companies located in the CEE region remains capacity replacement — the same as the EU average (46% of companies in CEE countries and in the EU). This is followed by capacity expansion (25% of companies in CEE) and innovation (17%). Manufacturing companies (20%) and large organizations (18%) invest relatively more in innovation.

Companies from Poland (22%), Slovenia (19%) and the Czech Republic (17%) allocate the greatest share of funds to innovation, investing in the development of new products or services. In contrast to EU and U.S. companies, those operating in the CEE region allocated a bigger share of their investment to machinery and equipment (53% vs. 49% in the EU and 47% in the United States), and a smaller share to intangible assets (24% vs. 37% in the EU and 33% in the United States). The share of companies intending to focus primarily on product and service innovation in CEE (27%) exceeded the result recorded in the EU (24%) and the United States (21%) in this regard.

Innovation is an especially important investment priority for manufacturing firms and large companies. In particular, machinery and equipment dominated the investment expenditure of manufacturing (60% of investment expenditure) and construction companies (59%), while service companies invested relatively more in digital technologies (18%).

The share of investment in intangible assets was highest in Latvia, Slovakia, Slovenia, and the Czech Republic.

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