Economic Policy Instruments for Innovative Growth in the European Union - The Case of AI

Abstract The recent economic (USA tariffs) and geopolitical (conflict in Ukraine) developments are creating a host of challenges for the EU, at a time when a new wave of high technology is intensifying EU’s economic competition with the U.S. and China. In the last 15 years, the European economy has been lagging in both the quantitative and qualitative characteristics of growth compared with its two main rivals. Therefore, the enhancement of the EU’s technological and product innovation capabilities is of critical importance for its future positions in the global marketplace. This research focuses on the selection of adequate economic policy instruments for the establishment of an investment, R&D, and institutional environment that will enhance innovation processes in the EU, with a focus on artificial intelligence (AI) – where, currently, the EU lags behind the USA and China. An in-depth analysis outlines the key factors behind the lag and proposes specific mechanisms and instruments for catching up.