Innovation in Agriculture: Driving Economic Development through EU Knowledge-Based Economy

Innovation in agriculture is vital for enhancing sustainability, productivity, and economic development, especially in light of global challenges such as population growth, resource scarcity, and climate change. This study, adopting a quantitative cross-sectional approach, investigates the relationship between agricultural innovation and productivity within the EU. By employing multiple regression analysis with a log-log transformation, the study explores how R&D expenditure in agriculture and various control variables impact agricultural productivity across EU-27 countries from 2000 to 2019. To address potential endogeneity concerns, the Instrumental Variables (IV) approach was applied, using the Two-Stage Least Squares (2SLS) method, which reduced bias in the estimation. The results revealed that a 1 % increase in R&D spending in agriculture corresponds to an approximate 0.33% increase in total crop output, indicating a strong positive link between innovation and agricultural productivity. The model residuals confirm a satisfactory fit, highlighting the robustness of the findings. This study provides valuable insights into how agricultural innovation can drive productivity, offering important implications for policymakers and researchers aiming to optimise agricultural output through increased investment in innovation.