The role of institutions in shaping state competitiveness: the evidence from the European countries

Abstract

The article aims to define the role of institutions in shaping competitiveness in certain European states. The research problem to be addressed through this study is to what extent does the level of competitiveness in world economy depends on Worldwide Governance Indicators (WGI) in particular countries. The study was conducted using a combination of quantitative and qualitative research methods of data analysis. A cross-country comparative analysis, based on data from 32 European states in 2021, revealed that the level of competitiveness is determined by institutional environment. The higher the WGI percentile ranks, the better place in the World Competitiveness Ranking. The results of the study enabled to fully confirm the 1st hypothesis, i.e. the institutional governance quality and control of corruption have a noticeably positive impact on competitiveness. It was revealed that the 2nd hypothesis could not be confirmed because of statistical insignificance, i.e. countries with political stability, absence of violence/terrorism and quality of law are typically more competitive among world economies. Meanwhile, the 3rd one was partially confirmed, i.e. the quality of regulations leads to higher competitiveness of economies, while freedom of expression, free media and ability to participate in national elections have not a significant impact on competitiveness.