Institutions, Investments and Technology: the EU Evidence Points to the Need for Stronger Policy Environments

This paper examines how institutional quality shapes investment decisions and, consequently, technological development within European Union economies. Building on both classical and modern institutionalist frameworks, it conceptualizes innovation as a process embedded in broader social and political structures. Using panel data from 2002–2019, the analysis explores how regulatory quality and control of corruption interact with macroeconomic factors such as trade openness and foreign investment to influence sectoral investment allocation. The findings reveal that stronger institutional environments foster investment in innovation-intensive industries, enhancing technological capabilities and supporting sustainable, innovation-driven growth across EU member states.