Determinants of Total Factor Productivity in the EU-CEE. The Role of Intangible Assets and Institutional Quality
Abstract
This study investigates the determinants of total factor productivity (TFP) in European Union (EU) countries, with a particular focus on the transition economies of Central and Eastern Europe (EU-CEE). Using a balanced panel dataset for 2013-2019, we apply fixed-effects panel regression with robust standard errors to assess the impact of four key factors intangible asset accumulation, business environment quality, information and communication technologies (ICTs), and knowledge workers on TFP growth. The results demonstrate that investment in intangible assets has a consistent and statistically significant positive effect on TFP across all model specifications. The quality of the business environment also significantly influences productivity, especially in EU-CEE countries, where institutional reforms and regulatory improvements have delayed but lasting effects. ICTs contribute positively to TFP, with a stronger lagged impact in countries where digital infrastructure and absorption capacity are still developing. Conversely, the share of knowledge workers does not show a statistically significant relationship with productivity unless complemented by investments in intangible and organizational capital. The findings confirm that intangible assets and institutional quality are decisive long-term drivers of productivity growth and convergence in the EU. The policy implications highlight the need for sustained support for intangible investment, ICT diffusion, and institutional strengthening to accelerate productivity and narrow regional disparities.
References
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Bontadini, F., Corrado, C., Haskel, J., Iommi, M., and Jona-Lasinio, C. (2023). EUKLEMS and INTANProd: Industry productivity accounts with intangibles – Sources of growth and productivity trends: Methods and main measurement challenges (Deliverable D2.3.1). LUISS / EUKLEMS and INTANProd. https://euklems-intanprod-llee.luiss.it/wp-content/uploads/2023/02/EUKLEMS_INTANProd_D2.3.1.pdf
Brynjolfsson, E., and Hitt, L. M. (2000). Beyond computation: Information technology, organizational transformation and business performance. Journal of Economic Perspectives, 14(4), 23–48. https://doi.org/10.1257/jep.14.4.23
Brynjolfsson, E., Hitt, L. M., and Berndt, E. R. (2003). Computing productivity: Firm-level evidence. Review of Economics and Statistics, 85(4), 793–808. https://doi.org/10.1162/003465303772815736
Corrado, C., Hulten, C., and Sichel, D. (2009). Intangible capital and U.S. economic growth. Review of Income and Wealth, 55(3), 661–685. https://doi.org/10.1111/j.1475-4991.2009.00343.x
Corrado, C., Haskel, J., Jona-Lasinio, C., and Iommi, M. (2022). Intangible capital and modern economies. Journal of Economic Perspectives, 36(3), 3–28. https://doi.org/10.1257/jep.36.3.3
Corrado, C., Haskel, J., Iommi, M., Jona-Lasinio, C., and Bontadini, F. (2025). Data, intangible capital, and productivity. In S. Basu, L. Eldridge, J. Haltiwanger, and E. Strassner (Eds.), Technology, productivity, and economic growth (Chap. 7). University of Chicago Press / NBER. https://www.nber.org/books-and-chapters/technology-productivity-and-economic-growth/data-intangible-capital-and-productivity
Cortinovis, N., and van Oort, F. (2019). Between spilling over and boiling down: Network-mediated spillovers, local knowledge base and productivity in European regions. Journal of Economic Geography, 19(6), 1233–1260. https://doi.org/10.1093/jeg/lby058
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Griffith, R., Redding, S., and Van Reenen, J. (2004). Mapping the two faces of RandD: Productivity growth in a panel of OECD industries. Review of Economics and Statistics, 86(4), 883–895. https://doi.org/10.1162/0034653043125194
Gu, W., and Tang, J. (2004). Link between innovation and productivity in Canadian manufacturing industries. Economics of Innovation and New Technology, 13(7), 671–686. https://doi.org/10.1080/1043890410001686806
Hall, R. E., and Jones, C. I. (1999). Why do some countries produce so much more output per worker than others? Quarterly Journal of Economics, 114(1), 83–116. https://doi.org/10.1162/003355399555954
Haskel, J., and Westlake, S. (2018). Capitalism without capital: The rise of the intangible economy. Princeton University Press. https://doi.org/10.2307/j.ctvc77hhj
Hausman, J. A. (1978). Specification tests in econometrics. Econometrica, 46(6), 1251–1271. https://doi.org/10.2307/1913827
Lee, R., Lee, J.-H., and Garrett, T. C. (2019). Synergy effects of innovation on firm performance. Journal of Business Research, 99, 507–515. https://doi.org/10.1016/j.jbusres.2017.08.032
Masso, J., and Vahter, P. (2012). Innovation and firm performance in the services sector in Estonia. In E. G. Carayannis, U. Varblane, and T. Roolaht (Eds.), Innovation systems in small catching-up economies (pp. 121–138). Springer. https://doi.org/10.1007/978-1-4614-1548-0_7
Nelson, R. R., and Winter, S. G. (1982). An evolutionary theory of economic change. Harvard University Press.
North, D. C. (1990). Institutions, institutional change and economic performance. Cambridge University Press. https://doi.org/10.1017/CBO9780511808678
O’Mahony, M., and Vecchi, M. (2009). RandD, knowledge spillovers and company productivity performance. Research Policy, 38(1), 35–44. https://doi.org/10.1016/j.respol.2008.09.003
OECD. (2013). Supporting investment in knowledge capital, growth and innovation. OECD Publishing. https://doi.org/10.1787/9789264193307-en
OECD. (2021). New evidence on intangibles, diffusion and productivity (OECD Productivity Working Papers No. 26). OECD Publishing. https://www.oecd.org/content/dam/oecd/en/publications/reports/2021/07/new-evidence-on-intangibles-diffusion-and-productivity_f15ac91a/de0378f3-en.pdf
Pekarčík, M., Ďurčová, J., and Glova, J. (2022). Intangible ICT and their importance within global value chains: An empirical analysis based on longitudinal data regression. Mathematics, 10(7), 1198. https://doi.org/10.3390/math10071198
Rehman, N. U., and Nunziante, G. (2023). The effect of the digital economy on total factor productivity in European regions. Telecommunications Policy, 47(10), 102650. https://doi.org/10.1016/j.telpol.2023.102650
Romer, P. M. (1990). Endogenous technological change. Journal of Political Economy, 98(5, Part 2), S71–S102. https://doi.org/10.1086/261725
Roth, F., and Thum, A.-E. (2013). Intangible capital and labour productivity growth: Panel evidence for the EU, 1998–2005. Review of Income and Wealth, 59(4), 486–508. https://doi.org/10.1111/roiw.12009
Schumpeter, J. A. (1942). Capitalism, socialism and democracy. Harper and Brothers.
Solow, R. M. (1957). Technical change and the aggregate production function. Review of Economics and Statistics, 39(3), 312–320. https://doi.org/10.2307/1926047
Stettler, T. R., Moosauer, E. J., Schweiger, S. A., Baldauf, A., and Audretsch, D. (2024). Absorptive capacity in a more (or less) absorptive environment: A meta-analysis of contextual effects on firm innovation. Journal of Product Innovation Management. https://doi.org/10.1111/jpim.12758
Syverson, C. (2011). What determines productivity? Journal of Economic Literature, 49(2), 326–365. https://doi.org/10.1257/jel.49.2.326
van Ark, B., O’Mahony, M., and Timmer, M. P. (2008). The productivity gap between Europe and the United States: Trends and causes. Journal of Economic Perspectives, 22(1), 25–44. https://doi.org/10.1257/jep.22.1.25
van Beveren, I. (2012). Total factor productivity estimation: A practical review. Journal of Economic Surveys, 26(1), 98–128. https://doi.org/10.1111/j.1467-6419.2010.00631.x
Veblen, T. (1904). The theory of business enterprise. Charles Scribner’s Sons. https://archive.org/details/in.ernet.dli.2015.46527
Veblen, T. (1908). On the nature of capital: Investment, intangible assets, and the pecuniary magnate. Quarterly Journal of Economics, 22(4), 517–542. https://doi.org/10.2307/1883967
Wang, J., Zhang, Q., and Li, Q. (2020). RandD investment and total factor productivity: An empirical study of the listed companies in the coastal regions of China. Journal of Coastal Research, 106(SI), 13. https://doi.org/10.2112/SI106-004.1
Wang, Q., Liu, T., and Zhong, X. (2024). Digital innovation, investment efficiency and total factor productivity: Evidence from enterprise digital patents. Applied Economics, 56(58), 8183–8197. https://doi.org/10.1080/00036846.2023.2289941
World Intellectual Property Organization. (2025). Global Innovation Index. https://www.wipo.int/en/web/global-innovation-index
Aghion, P., and Howitt, P. (1992). A Model of Growth through Creative Destruction. Econometrica, 60(2), 323–351. https://doi.org/10.2307/2951599
Arellano, M. (1987). Computing robust standard errors for within-groups estimators. Oxford Bulletin of Economics and Statistics, 49(4), 431–434. https://doi.org/10.1111/j.1468-0084.1987.mp49004006.x
Balcerzak, A. P., and Pietrzak, M. B. (2015). Quality of institutions and total factor productivity in European Union countries (Institute of Economic Research Working Papers No. 165). Institute of Economic Research. https://www.econstor.eu/bitstream/10419/219780/1/ier-wp-2015-165.pdf
Bloch, C., Roth, F., van Criekingen, K., and Piekkola, H. (2024). Intangibles and their contribution to productivity: An overview. In Intangible assets, productivity and economic growth (p. 22). Routledge. https://doi.org/10.4324/9781003324225-3
Bontadini, F., Corrado, C., Haskel, J., Iommi, M., and Jona-Lasinio, C. (2023). EUKLEMS and INTANProd: Industry productivity accounts with intangibles – Sources of growth and productivity trends: Methods and main measurement challenges (Deliverable D2.3.1). LUISS / EUKLEMS and INTANProd. https://euklems-intanprod-llee.luiss.it/wp-content/uploads/2023/02/EUKLEMS_INTANProd_D2.3.1.pdf
Brynjolfsson, E., and Hitt, L. M. (2000). Beyond computation: Information technology, organizational transformation and business performance. Journal of Economic Perspectives, 14(4), 23–48. https://doi.org/10.1257/jep.14.4.23
Brynjolfsson, E., Hitt, L. M., and Berndt, E. R. (2003). Computing productivity: Firm-level evidence. Review of Economics and Statistics, 85(4), 793–808. https://doi.org/10.1162/003465303772815736
Corrado, C., Hulten, C., and Sichel, D. (2009). Intangible capital and U.S. economic growth. Review of Income and Wealth, 55(3), 661–685. https://doi.org/10.1111/j.1475-4991.2009.00343.x
Corrado, C., Haskel, J., Jona-Lasinio, C., and Iommi, M. (2022). Intangible capital and modern economies. Journal of Economic Perspectives, 36(3), 3–28. https://doi.org/10.1257/jep.36.3.3
Corrado, C., Haskel, J., Iommi, M., Jona-Lasinio, C., and Bontadini, F. (2025). Data, intangible capital, and productivity. In S. Basu, L. Eldridge, J. Haltiwanger, and E. Strassner (Eds.), Technology, productivity, and economic growth (Chap. 7). University of Chicago Press / NBER. https://www.nber.org/books-and-chapters/technology-productivity-and-economic-growth/data-intangible-capital-and-productivity
Cortinovis, N., and van Oort, F. (2019). Between spilling over and boiling down: Network-mediated spillovers, local knowledge base and productivity in European regions. Journal of Economic Geography, 19(6), 1233–1260. https://doi.org/10.1093/jeg/lby058
Feenstra, R. C., Inklaar, R., and Timmer, M. P. (2025). Penn World Table version 12.0 [Data set]. Groningen Growth and Development Centre. https://www.rug.nl/ggdc/productivity/pwt/?lang=en
Gordon, L. A., Loeb, M. P., Lucyshyn, W., and Zhou, L. (2015). Increasing cybersecurity investments in private sector firms. Cybersecurity, 1(1), 3. https://doi.org/10.1093/cybsec/tyv011
Griffith, R., Redding, S., and Van Reenen, J. (2004). Mapping the two faces of RandD: Productivity growth in a panel of OECD industries. Review of Economics and Statistics, 86(4), 883–895. https://doi.org/10.1162/0034653043125194
Gu, W., and Tang, J. (2004). Link between innovation and productivity in Canadian manufacturing industries. Economics of Innovation and New Technology, 13(7), 671–686. https://doi.org/10.1080/1043890410001686806
Hall, R. E., and Jones, C. I. (1999). Why do some countries produce so much more output per worker than others? Quarterly Journal of Economics, 114(1), 83–116. https://doi.org/10.1162/003355399555954
Haskel, J., and Westlake, S. (2018). Capitalism without capital: The rise of the intangible economy. Princeton University Press. https://doi.org/10.2307/j.ctvc77hhj
Hausman, J. A. (1978). Specification tests in econometrics. Econometrica, 46(6), 1251–1271. https://doi.org/10.2307/1913827
Lee, R., Lee, J.-H., and Garrett, T. C. (2019). Synergy effects of innovation on firm performance. Journal of Business Research, 99, 507–515. https://doi.org/10.1016/j.jbusres.2017.08.032
Masso, J., and Vahter, P. (2012). Innovation and firm performance in the services sector in Estonia. In E. G. Carayannis, U. Varblane, and T. Roolaht (Eds.), Innovation systems in small catching-up economies (pp. 121–138). Springer. https://doi.org/10.1007/978-1-4614-1548-0_7
Nelson, R. R., and Winter, S. G. (1982). An evolutionary theory of economic change. Harvard University Press.
North, D. C. (1990). Institutions, institutional change and economic performance. Cambridge University Press. https://doi.org/10.1017/CBO9780511808678
O’Mahony, M., and Vecchi, M. (2009). RandD, knowledge spillovers and company productivity performance. Research Policy, 38(1), 35–44. https://doi.org/10.1016/j.respol.2008.09.003
OECD. (2013). Supporting investment in knowledge capital, growth and innovation. OECD Publishing. https://doi.org/10.1787/9789264193307-en
OECD. (2021). New evidence on intangibles, diffusion and productivity (OECD Productivity Working Papers No. 26). OECD Publishing. https://www.oecd.org/content/dam/oecd/en/publications/reports/2021/07/new-evidence-on-intangibles-diffusion-and-productivity_f15ac91a/de0378f3-en.pdf
Pekarčík, M., Ďurčová, J., and Glova, J. (2022). Intangible ICT and their importance within global value chains: An empirical analysis based on longitudinal data regression. Mathematics, 10(7), 1198. https://doi.org/10.3390/math10071198
Rehman, N. U., and Nunziante, G. (2023). The effect of the digital economy on total factor productivity in European regions. Telecommunications Policy, 47(10), 102650. https://doi.org/10.1016/j.telpol.2023.102650
Romer, P. M. (1990). Endogenous technological change. Journal of Political Economy, 98(5, Part 2), S71–S102. https://doi.org/10.1086/261725
Roth, F., and Thum, A.-E. (2013). Intangible capital and labour productivity growth: Panel evidence for the EU, 1998–2005. Review of Income and Wealth, 59(4), 486–508. https://doi.org/10.1111/roiw.12009
Schumpeter, J. A. (1942). Capitalism, socialism and democracy. Harper and Brothers.
Solow, R. M. (1957). Technical change and the aggregate production function. Review of Economics and Statistics, 39(3), 312–320. https://doi.org/10.2307/1926047
Stettler, T. R., Moosauer, E. J., Schweiger, S. A., Baldauf, A., and Audretsch, D. (2024). Absorptive capacity in a more (or less) absorptive environment: A meta-analysis of contextual effects on firm innovation. Journal of Product Innovation Management. https://doi.org/10.1111/jpim.12758
Syverson, C. (2011). What determines productivity? Journal of Economic Literature, 49(2), 326–365. https://doi.org/10.1257/jel.49.2.326
van Ark, B., O’Mahony, M., and Timmer, M. P. (2008). The productivity gap between Europe and the United States: Trends and causes. Journal of Economic Perspectives, 22(1), 25–44. https://doi.org/10.1257/jep.22.1.25
van Beveren, I. (2012). Total factor productivity estimation: A practical review. Journal of Economic Surveys, 26(1), 98–128. https://doi.org/10.1111/j.1467-6419.2010.00631.x
Veblen, T. (1904). The theory of business enterprise. Charles Scribner’s Sons. https://archive.org/details/in.ernet.dli.2015.46527
Veblen, T. (1908). On the nature of capital: Investment, intangible assets, and the pecuniary magnate. Quarterly Journal of Economics, 22(4), 517–542. https://doi.org/10.2307/1883967
Wang, J., Zhang, Q., and Li, Q. (2020). RandD investment and total factor productivity: An empirical study of the listed companies in the coastal regions of China. Journal of Coastal Research, 106(SI), 13. https://doi.org/10.2112/SI106-004.1
Wang, Q., Liu, T., and Zhong, X. (2024). Digital innovation, investment efficiency and total factor productivity: Evidence from enterprise digital patents. Applied Economics, 56(58), 8183–8197. https://doi.org/10.1080/00036846.2023.2289941
World Intellectual Property Organization. (2025). Global Innovation Index. https://www.wipo.int/en/web/global-innovation-index
Published
2026-03-30
How to Cite
PEKARČÍK, Marek; ŠAFÁR, Leoš; TAŇKOŠOVÁ, Tatiana.
Determinants of Total Factor Productivity in the EU-CEE. The Role of Intangible Assets and Institutional Quality.
Theoretical and Practical Research in Economic Fields, [S.l.], v. 17, n. 1, p. 5 - 15, mar. 2026.
ISSN 2068-7710.
Available at: <https://journals.aserspublishing.eu/tpref/article/view/9366>. Date accessed: 05 apr. 2026.
doi: https://doi.org/10.14505/tpref.v17.1(37).01.
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