Abstract
This article sets out to examine the innovative capacity of the European Union (EU) countries and regions vis-à-vis educational attainment and economic development, as it is frequently stated that innovation and the availability of human capital, specifically education, are the key drivers of economic growth. In addition to the aggregate level, the countries and NUTS-2 regions of the EU, and traditional indicators of the studied dimensions, were used as observation units. Granger causality tests identified education as a driving force behind innovative capacity and economic development, whereas the relationship between innovative capacity and economic development is bidirectional. The study results also confirm the existence of innovation paradoxes in form of rising research and development expenditures but modest rate of gross domestic product growth. The implications of the results concern the recognition of spatial generalizations and national variations, identification and creation of development strategies and the horizontal and vertical collaborations between the public and private sectors. © 2013 Taylor & Francis.