Socialist Legacy, Cooperation, and Innovation

Custom Field Value: October 19, 2025

In a new paper, Maria Greve, Michael Wyrwich, and I examine how the legacy of socialist regime in countries of Central and Eastern Europe affected innovation and R&D cooperation. Specifically, we are interested in how institutional framework conditions, both formal and informal, in Eastern Europe help explain this gap. These framework conditions are often cited as hindering innovation activity and are rooted in the communist legacy. We explore how much of the East-West gap can be attributed to these framework conditions, specifically institutional quality (i.e., quality of government) and interpersonal trust. Both factors are important for innovation, but they are clearly less favorable in Eastern Europe, mostly due to the communist legacy. To test the effect of communism on innovation, we analyzed patenting activities in European regions.

We find that the effect of the socialist legacy on innovation activity is largely mediated by the quality of the government and by interpersonal trust. At the same time, the socialist legacy negatively affects the trust and quality of government. Overall, about 70 percent of the impact of socialism on innovation activity can be attributed to these two mediators, particularly the quality of government. Since institutional quality and interpersonal trust also play an important role in cooperation, we analyzed the number of co-patents. The results resemble our findings for the overall level of innovation activity. Therefore, socialism also affected the mode of innovation, particularly collaborative efforts. Further analyses indicate that institutional quality and interpersonal trust are highly intertwined.

Altogether, our findings underscore the enduring power of history in shaping innovation and regional disparities. For policymakers, this research highlights the need for integrated strategies that address both formal and informal institutions to foster innovation in post-communist regions. For scholars, it opens new avenues for exploring the interplay between history, institutions, and innovation in other global contexts.

Fritsch, Michael, Maria Greve and Michael Wyrwich: The impact of socialist legacy on regional differences in innovation activities and cooperation in Europe: A mediation analysis. Research Papers #2025-010, Friedrich Schiller University Jena. https://oweb.b67.uni-jena.de/Papers/jerp2023/wp_2025_010.pdf