This study introduces a methodology to quantify knowledge flow in Spanish manufacturing firms, utilizing data from the Enterprise Strategy Survey (ESEE). A composite index is created through a structural equation model (SEM) featuring latent variables, which removes any subjectivity in weighting the dimensions. The analysis encompasses seven critical dimensions concerning innovation, R&D, work organization, and the Internet. Results indicate that dimensions linked to R&D significantly influence knowledge flow and, consequently, business productivity. The combination of R&D investment and the implementation of new organizational approaches in the workplace shows a positive and statistically significant correlation with enhanced productivity. These findings emphasize companies' need to embrace strategies that merge technological advancement with organizational innovation. In this regard, the knowledge flow index highlights the importance of incorporating both elements. This method provides a statistically sound tool for evaluating business competitiveness, emphasizing the necessity of integrating technology and organizational innovation within corporations’ strategies.

The sustainability of the European Union depends upon reducing its structural divergences. Under this premise, and taking into account that R&D policies are key to transforming productivity in EU countries that are technologically less advanced, the European Commission obtained from each of its member states commitments regarding the efforts towards R&D (expenditure as a percentage of GDP) that they would be making by the year 2020. In this study we demonstrate the unlikelihood of these commitments being fulfilled, especially in those countries with a greater need for productive transformation, of which Spain is one example. This predicted failure is heavily influenced by the austerity measures imposed on the aforementioned countries by the very same European Commission, which resulted in major cuts in their R&D expenditure. In this context, the EU is moving towards greater degrees of divergence, generating serious doubts about its continued feasibility.