The objective of this analysis is to investigate research and development (R&D) and human capital as drivers of productivity growth in European regions. Productivity levels across countries and regions vary to a large degree and the discrepancies tend to persist over time. Moreover, differences in productivity account for a major part of per capita income disparities. Despite extensive economic and policy measures, substantial productivity gaps are still prevalent in the European Union (EU). The crucial challenge for researchers and policy-makers is to understand the causes of productivity gaps and to determine ways to escape low productivity.