Industrial Growth, Investment Behavior and Innovations in Bulgaria

This paper traces trends in industrial growth against the backdrop of the overall economic growth in Bulgaria under the influence of the ongoing economic reforms and evaluates them against the performance of macro-firm data. Bulgarian industry has lost many of its positions since of the beginning of 1990s. Structural reform during the transition period resulted in lost markets, lack of innovations, low product quality, and inefficient organizational and production structure. The analysis reveals that a phase of growth revival has begun in the overall economy since the beginning of the twenty-first century. Some industrial sectors demonstrate significant and stable growth based on technological innovation, increased labor productivity and efficiency, and increased investments. In this paper we claim that the problem is not deeply studied and only a few economists have done research on it since Bulgaria's accession to the European Union. The analysis reveals different factors influencing Bulgarian industrial growth before and after accession to the EU. The assessment of the endogenous and exogenous factors determines the key role of innovation, R&D, and human resource development, and presents the interrelation between innovations, investments, and industry growth. Section one of the paper is an Introduction. Section 2 briefly presents the state of art and methodology. Section 3 focuses on analysis of investment and innovations behavior in Bulgaria for the last eight years (2000 – 2008) on the basis of macro and firm-level data. Section 4 presents possible scenarios, and section 5 gives the conclusions of the study. Keywords: innovations, investment behavior, industrial growth Bulgarian economy