Rome:  This article explores the impact of the current economic downturn on investment in innovation. First, what is the impact of the recession on firms' innovation activities? Second, what will be the outcomes on the innovation capabilities across the European countries?

Using structural data from the European Innovation Scoreboard and results from the Innobarometer Survey, the authors show that the recession is having a huge impact on innovation investments across European countries. They also point out that the effects of the economic downturn are not the same across Europe, and that this depends on specific features of the national innovation structure and national policies. The paper concludes with a discussion of policy considerations.

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