Innovation in Romania stalled by fragmentation and lack of funding. The World Bank calls for urgent reforms

Romania’s innovation ecosystem remains poorly coordinated and underfunded, according to a report published by the World Bank. The study highlights structural issues such as the absence of a central authority to support innovative companies, overlapping institutional responsibilities, and weak collaboration between academia and the private sector.

Productivity could increase by up to 15%

Despite these shortcomings, experts say Romania has significant growth potential. Widespread adoption of digital technologies, including software solutions and artificial intelligence, could boost labor productivity by 10–15%.

Romania has made progress in closing the gap with the EU average, reaching 79% of European income levels in 2024. However, the economy remains reliant on low value-added sectors, with manufacturing accounting for a relatively small share of GDP compared to services.

Last place in the EU for innovation

According to the European Innovation Scoreboard 2025, Romania ranks last in the European Union in terms of innovation performance, at under 70% of the EU average.

Although the country has strong human capital potential—with 28% of graduates in STEM fields—this is not reflected in the development of competitive, export-oriented companies.

Labor market and research challenges

The report points to a mismatch between graduates’ skills and labor market needs. Despite a high number of STEM graduates, companies struggle to find qualified workers, suggesting issues with the quality of education.

At the same time, Romania has around 4 research and development employees per 1,000 workers—one of the lowest levels in the EU—and only 36% of them work in the private sector.

Major risks without reform

Experts warn that without deep structural changes, Romania risks:

• missing the digital and green transition

• remaining stuck in a low-cost economic model

• continuing to lose talent through migration

Seven key directions proposed by the World Bank

To strengthen the innovation ecosystem, the report recommends:

• introducing multiannual budgeting for innovation programs

• establishing a national agency for innovative firms and a dedicated startup hub

• improving coordination through the National Committee for Science, Technology and Innovation

• redirecting funding toward company-level R&D and industry collaboration

• supporting startups through training and acceleration programs

• implementing regulatory reforms and digitalizing administrative procedures

• enhancing entrepreneurial education and fostering academia–industry partnerships

Low demand and supply of innovation

The report also notes that demand for innovation is weak, as most companies are microenterprises and entrepreneurship is often driven by necessity. At the same time, R&D investment is among the lowest in the EU (0.52% of GDP), and collaboration between SMEs and universities remains limited.

Conclusion

Experts at the World Bank recommend shifting from a traditional “science-push” model focused on infrastructure and academic output to a systemic, business-oriented approach. Implementing these measures could unlock Romania’s potential and accelerate sustainable economic growth.