Pioneering emergence of new markets and expanding competition areas make innovation the basis of development and dynamism in all economies. In this respect, innovation which creates significant impacts in a way that increasing and supporting competition can also create impacts that will change qualification of competition in goods and services markets.In this study, the effect of the factors determining the innovation on competitiveness for member and candidate countries of the European Union was analyzed with panel data analysis. Empirical findings obtained have revealed that two determinants of innovation –knowledge&technology output and creative output- positively affect competitiveness.

Pioneering emergence of new markets and expanding competition areas make innovation the basis of development and dynamism in all economies. In this respect, innovation which creates significant impacts in a way that increasing and supporting competition can also create impacts that will change qualification of competition in goods and services markets.In this study, the effect of the factors determining the innovation on competitiveness for member and candidate countries of the European Union was analyzed with panel data analysis. Empirical findings obtained have revealed that two determinants of innovation –knowledge&technology output and creative output- positively affect competitiveness.