Role and importance of companies in shaping and functioning of the innovation system

By continuously strengthening research and development (R&D) activities and innovative capabilities, companies are achieving long-term sustainable competitive advantages in today’s increasingly complex and uncertain markets. At the same time, by creating new knowledge, innovative application of existing knowledge and technologies, and facilitating their transfer, they contribute to building a knowledge economy and the country’s competitiveness. One of the pillars of the knowledge economy is an effective innovation system, in which companies have a special place and role. The aim of this paper is to present and analyse the contribution of companies to the efficient functioning of innovation systems, to examine the relationship and impact of innovation and R&D expenditures on global competitiveness. The Global Innovation Index (GII) and the Global Competitiveness Index (GCI), in which innovation and sophistication represent one of the three categories of competitiveness, were used as a methodological framework for analysing the effects of innovation capabilities. The focus of the analysis was the relationship between innovation inputs and innovation outputs, as well as the relationship between the GII and GCI of Bosnia and Herzegovina, the countries of the Western Balkans and the group of selected countries of the European Union (EU). The research results show that there is a statistically significant relationship between innovation inputs and outputs. There are obvious differences in the strength of the link between the variables of innovation and competitiveness for the countries of the Western Balkans and for selected EU member states. It was also found that R&D expenditures significantly affect the value of the competitiveness index.