This paper investigates the interplay between social capital, innovation
and economic growth in the European Union. We identify innovation as an
important mechanism that transforms social capital into economic growth.
In an empirical investigation of 102 European regions in the period
1990-2002, we show that higher innovation performance is conducive to
economic growth and that social capital affects growth indirectly by
fostering innovation. Our estimates suggest that there is only a limited
role for a direct effect of social capital on economic growth.
JEL classification: O1; O3; O52; Z13
Key words: Social capital; Innovation; Economic growth; European Union
UNU-MERIT Working Papers ISSN 1871-9872