Abstract. Innovation is often considered to be a typical activity of the developed countries. If we put behind the leading excellence research institutions and the high educated specialists we can tell that innovation is, in the end, the attempt to create new or improved products or processes.

The aim of this study is to show the empirical evidence on the link between innovation and economic growth in the Central and Eastern European countries (CEE). Even if this part of Europe was highly affected by the economic crises, we consider that innovation can be the most important component of long-term economic growth. Our study considers a number of different proxies to measure innovation, such as R&D spending, patenting or the number of researchers as well as firms characteristics and mergers and acquisitions. Our findings are consistent with the existing literature that innovation makes significant contribution to national competitiveness and economic growth and the gap between the Western and Eastern economies can be reduced by investing in innovation.

Keywords: innovation; economic growth; competitiveness; CEE countries.