Knowledge flows and ecological efficiency: A regional analysis of open innovation in the European Union

Open innovation is acknowledged as a dual paradigm that can improve ecological efficiency (Eco-Efficiency) via knowledge dissemination and advanced technologies, while simultaneously escalating environmental pressure through intensified economic activities and resource consumption. This paper analyzes the dual effects of intellectual property payments and receipts as proxies for open innovation on Eco-Efficiency, and examines the heterogeneity of these effects between Eastern and Western European Union (EU) countries from 2011 to 2020. Eco-Efficiency was measured using data envelopment analysis (DEA) under an output-oriented variable returns to scale (BCC) model. To estimate causal relationships, a panel regression model with fixed effects and a feasible generalized least squares (FGLS) estimator was employed to address heteroskedasticity and autocorrelation issues. Results for the entire EU indicated that both payment and receipt variables had a positive and significant impact on Eco-Efficiency. However, regional analysis revealed a clear duality: in Western countries, receipts had a small positive effect while payments were insignificant, whereas in Eastern countries, payments had a strong negative effect and receipts showed a strong positive effect on Eco-Efficiency. These findings, which held robust even when tested with the generalized method of moments (GMM) estimator and an alternative dependent variable, highlight the need for region-specific and intelligent policy approaches in the management of open innovation flows to attain sustainable development goals.