CEE economies risk falling behind without stronger R&D and digital infrastructure

The race to build a competitive digital economy in Central and Eastern Europe (CEE) is exposing a widening divide between countries that can turn digital infrastructure into innovation and those still slowed by weak research capacity, limited digital skills and fragmented entrepreneurial ecosystems. A new comparative study finds that Romania has improved steadily across key digital and innovation indicators, but its progress remains too slow to close the gap with regional peers and the European Union average.

The study, titled "Advancing the Digital Economy Through Innovative Entrepreneurship for Sustainable Development: A Comparative Analysis of Romania and CEE Countries," was published in Sustainability. The authors examine Romania's digital and entrepreneurial development from 2020 to 2024, comparing its performance with Poland, Hungary, Bulgaria and the EU average through indicators including the Global Entrepreneurship Monitor, the Digital Economy and Society Index, the Global Innovation Index and the European Innovation Scoreboard.

Digital transformation is becoming central to sustainable development

Digitalisation is no longer only a matter of technological upgrade. The digital economy is a core condition for sustainable development, with the study arguing that data-driven systems, online connectivity, digital infrastructure and innovation capacity increasingly determine whether countries can build resilient, inclusive and environmentally responsible economies.

This shift is especially important within the European Union's twin transition agenda, which links the digital transition with the green transition. Digital tools can support sustainability by monitoring carbon footprints, improving resource allocation, enabling circular business models, strengthening precision agriculture, supporting smart grids and helping firms reduce waste. But these gains depend on more than access to technology. They require skilled workers, innovative firms, research investment and institutions capable of turning digital capacity into economic and social value.

The study identifies digital entrepreneurship as a key engine of this transformation. Entrepreneurs can convert emerging technologies such as artificial intelligence, the Internet of Things, big data and digital platforms into scalable business models. In the sustainability context, the value of entrepreneurship is no longer measured only by profit or market expansion. The study emphasizes a broader model in which firms also generate social and environmental value, consistent with the "people, planet, profit" approach.

For Central and Eastern Europe, the stakes are high. Countries in the region share post-socialist economic legacies, structural adjustment challenges and a common need to modernize their innovation systems within EU frameworks. But their performance is increasingly uneven. Poland and Hungary are consolidating stronger innovation positions, while Romania and Bulgaria remain lower-performing economies in the digital and innovation rankings.

Romania is the main focus of the research because it reflects both the opportunities and bottlenecks of emerging digital economies. The country has shown an upward trajectory in digital indicators, but its innovation ecosystem remains constrained by weak digital human capital, limited local research and development investment and insufficient capacity to scale sustainability-oriented entrepreneurship.

The study draws on Schumpeterian theory, which treats entrepreneurship and innovation as forces that disrupt old economic structures and create new ones. In the current context, the authors extend this logic to the digital and green economy. Innovation is no longer only about new products, services or markets. It is also about integrating sustainability into the diffusion of technology so that economic modernization does not come at the expense of environmental and social goals.

The research proposes a framework in which digital infrastructure and entrepreneurial activity serve as foundational drivers of innovation capacity. That capacity then shapes final innovation performance. In practical terms, this means that digital networks, entrepreneurial energy and research systems must work together. A country cannot rely on start-up enthusiasm alone if it lacks skills, infrastructure, capital, research institutions and policy support.

The analysis covers Romania, Poland, Hungary, Bulgaria and the EU average over the 2020–2024 period. The authors use multiple linear regression to test how entrepreneurship, digitalisation and innovation capacity influence innovation performance. The European Innovation Scoreboard is treated as the measure of innovation performance, while the Global Entrepreneurship Monitor, Digital Economy and Society Index and Global Innovation Index serve as predictors.

The study's broader question is whether Romania's digital and entrepreneurial development is strong enough to support convergence with stronger regional performers and with the EU average. The answer is mixed. Romania is improving, but not quickly enough.

Romania improves, but remains behind regional leaders

Romania's digital performance increased during the five-year period, but the improvement was incremental rather than transformative. Its Digital Economy and Society Index score rose from 32.5 in 2020 to 38.7 in 2024, marking an improvement of roughly 19 percent. Yet the EU average reached 54.0 in 2024, leaving Romania well behind the bloc's digital benchmark.

That divide could shape sustainable development outcomes. Countries with stronger digital maturity are better positioned to deploy smart grids, data-driven public services, industrial automation, circular economy platforms and environmental monitoring tools. Romania's lag in digital human capital suggests that even when green technologies are available, the domestic workforce and business ecosystem may not be fully prepared to adopt, maintain and improve them.

The Global Innovation Index tells a similar story. Romania rose from 34.7 in 2020 to 38.1 in 2024, showing steady progress but remaining below the EU average of 50.2. Poland reached 43.1 in 2024, while Hungary reached 38.9 and Bulgaria 37.3. Romania narrowed some gaps but did not achieve the kind of structural leap required to move closer to top regional performers.

The European Innovation Scoreboard shows the most striking divide. Romania reached 37.4 in 2024, remaining in the "emerging innovator" category. Poland reached 62.1, while Hungary reached 60.2 and Bulgaria stood at 44.9. The EU average remained set at 100.0, making Romania's distance from the wider European benchmark especially clear.

The authors describe this as evidence of a two-speed Europe within the CEE region. Poland and Hungary have managed to strengthen their positions as moderate innovators, while Romania remains behind despite positive movement. Bulgaria, which is closer to Romania in performance, still outpaced it on several indicators.

Entrepreneurial activity also improved but remained modest. Romania's Global Entrepreneurship Monitor score rose from 4.4 in 2020 to 4.9 in 2024, compared with the EU average of 6.1. Poland reached 6.0, Hungary 5.3 and Bulgaria 4.4. The study suggests that Romania's challenge is not simply the quantity of entrepreneurship but its quality and orientation. Too much entrepreneurial activity remains necessity-driven rather than opportunity-driven, technology-led or sustainability-focused.

This difference is crucial. Necessity-driven entrepreneurship often reflects limited employment alternatives and tends to produce smaller, lower-productivity ventures. Opportunity-driven entrepreneurship is more likely to generate scalable innovation, high-value jobs, digital products and green technologies. For Romania to strengthen its innovation performance, it must move beyond basic entrepreneurial activity and support firms that can compete in knowledge-intensive sectors.

The regression analysis confirms that all three predictors studied by the authors are statistically significant for innovation performance. The Global Entrepreneurship Monitor, Digital Economy and Society Index and Global Innovation Index all show positive relationships with the European Innovation Scoreboard. This supports the study's core argument that entrepreneurship, digitalisation and innovation capacity jointly shape national innovation outcomes.

Among the three predictors, the Global Innovation Index shows the strongest effect. The model indicates that each one-point increase in the GII is associated with a 1.10-point increase in the EIS score, with high statistical significance. This suggests that research capability, institutional support, knowledge production and innovation systems are decisive for improving a country's European innovation ranking.

The DESI also has a significant positive effect. A one-point increase in digitalisation is associated with a 0.85-point rise in innovation performance. This finding reinforces the argument that digital infrastructure is not an optional add-on to development strategy. It is a structural condition for innovation.

Entrepreneurial activity also matters. The model shows that each unit increase in GEM is associated with a 1.92-point rise in innovation performance when other factors remain constant. This indicates that active entrepreneurship can support innovation, but the study notes that entrepreneurship must be backed by digital maturity and knowledge systems to become truly transformative.

The overall model explains 93.4 percent of the variation in innovation performance, but the authors caution that this should be interpreted carefully. Because the study uses a small sample and composite indicators, the high explanatory power may partly reflect overlap among the variables. The model is best understood as exploratory, identifying strong associations rather than proving definitive causality.

The results are clear enough to suggest that Romania's innovation gap is not caused by a single weakness. It reflects the interaction of digital infrastructure gaps, human capital constraints, limited research capacity and an entrepreneurial ecosystem that has not yet shifted fully toward high-value, sustainability-oriented innovation.

Policy roadmap points to green digital entrepreneurship and skills investment

The study argues that Romania needs a coherent strategy that combines research investment, digital infrastructure, entrepreneurial support and sustainability goals. Incremental progress will not be enough to close the gap with Poland, Hungary or the EU average. The country needs a structural shift toward a knowledge-based economy that can convert digital maturity into long-term innovation performance.

• Digital human capital: Romania's lag in digital skills is one of the main barriers to sustainable digital transformation. Without a workforce capable of developing, managing and applying advanced technologies, investments in infrastructure alone will not deliver innovation gains. The study calls for stronger digital education, interdisciplinary training and public-private partnerships that prepare workers and entrepreneurs for emerging sectors.
• Research and development: The strong effect of the Global Innovation Index shows that innovation performance depends heavily on the quality of a country's research base. Romania must increase investment in local R&D, strengthen links between universities and industry, and support research-intensive ventures that can generate higher-value products and services.
• Green-tech entrepreneurship: The study recommends incentives for start-ups focused on resource efficiency, circular economy models, smart energy systems and environmentally responsible digital solutions. This would help align Romania's entrepreneurial ecosystem with the EU's sustainability agenda and shift business creation toward opportunity-driven, high-impact sectors.
• Regional inclusion: Innovation in Romania cannot remain concentrated only in major urban centres. The study recommends supporting innovation hubs outside large cities, using digital tools to reduce regional economic disparities and create more inclusive growth. This is especially important because sustainable development depends on spreading opportunity across regions, not only raising national averages.
• Stronger institutional capacity: The study stresses that digital infrastructure alone does not guarantee innovation. Countries need governance frameworks, policy continuity, technology adoption support, innovation financing and knowledge-transfer systems. Weak institutions can prevent digital tools from translating into productivity, sustainability and competitiveness.

The study finds that Poland's stronger innovation performance reflects its ability to integrate digital infrastructure into the industrial sector and strengthen the link between entrepreneurship, research and economic resilience. Hungary also benefits from a more stable research ecosystem. Romania's more volatile and lower-level growth suggests that it has not yet built the same systemic capacity.

The risk is that Romania's innovation gap could become a lasting sustainability gap. If the country fails to develop digital skills, research capacity and green digital entrepreneurship, it may struggle to meet long-term EU targets and may become more dependent on imported technologies. That could weaken its ability to build domestic value chains, create high-skilled jobs and compete in emerging industries.

The study also warns against relying on technology adoption without local innovation. Importing digital tools may improve some processes, but sustainable competitiveness requires domestic capacity to adapt, improve and create technologies. Otherwise, the digital economy may remain superficial, producing limited gains in productivity or sustainability.

Romania's digital economy must move from basic adoption to innovation-driven transformation. That means firms should not only use digital technologies but also create new digital products, platforms and services aligned with environmental and social goals.

The research is also relevant to Central and Eastern Europe. The region is not moving uniformly toward digital convergence. Some countries are building stronger innovation systems, while others risk being left behind. EU-wide digital and sustainability targets will be harder to achieve if member states remain divided by human capital, research and infrastructure gaps.

For the EU, the findings point to the need for targeted support in lower-performing innovation systems. Cohesion policy, digital funding and green transition programmes may need to place more emphasis on skills, local R&D and regional innovation ecosystems, not only infrastructure spending.