The Lithuanian Economy - June 2016
Innovation – most room for progress
  • Lithuania is still a low- to medium – value-added economy
  • Higher spending on R&D is no guarantee for success
  • Low FDI, universities, and education are the most to blame

Not a high-tech country…

Despite some positive recent examples, the country still by and large remains a low- to medium- value-added economy, dominated by less knowledge-intensive services and low and medium-low technology manufacturing. The high-tech sector, which tends to be the most productive, still remains very small and underdeveloped. Transition towards a more value-added economy, through more innovation, is extremely important for Lithuania, otherwise the country risks getting stuck in the middle-income trap.

Higher spending on R&D is no guarantee for success

Despite the government’s focus on targeting R&D innovation, business R&D intensity, as well as patent applications, remains at stubbornly low levels. However, R&D is not the only source of innovation. Lithuanian companies tend to spend more on non-R&D innovation than companies do on average in the EU, but this does not seem to be delivering tangible results. The ability to absorb and adapt external technical knowledge is very poor in Lithuania.

Low FDI, universities, education and other culprits

One of the reasons why the high-tech sector in Lithuania is small and there is a lack of innovation is low and stagnating inward FDI and, thus, a lack of large innovative companies. Weak universities, fragmented research infrastructure, the poor quality of the education system, lack of alternative financing, and burdensome government support schemes also play an important role. Improving the situation requires structural reforms in education, regulation of the labour market, taxation, etc.

PDF The Lithuanian Economy - June 2016

For more information about this report, please contact Mrs. Laura Galdikienė, +370 5 258 2275,

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