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Roman Gurbiel
IMPACT OF INNOVATION AND TECHNOLOGY TRANSFER
ON ECONOMIC GROWTH: THE CENTRAL AND EASTERN
EUROPE EXPERIENCE
Warsaw School of Economics
Center of International Production Cooperation,
Al. Niepodlegoci 162 (bud. F, p. 913)
02 554 Warszawa, Poland
tel. (+48-22) 646 61 27
fax (+48-22) 646 61 15
e-mail: [email protected]
Warsaw, July 2002
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CONTENTS
Abstract...............................................................................................................................................3
1 Specifics of Technology Transfer and the Innovation Process ..............................................3
2 Technology and Economic Growth - Theoretical Issues........................................................6
3 Competitiveness Central and Eastern Europe Technology Gap........................................9
3.1 CEE in the Competitiveness Ratings 9
3.2 Finland a New Technology Powerhouse 11
4 Central and Eastern Europe Innovation Potential Constraints and Challenges............12
5 Summary...................................................................................................................................16
6 Bibliography .............................................................................................................................18
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Abstract
The main objective of this paper is to present the experiences of Central and Eastern European
Countries (with special emphasis on Poland, the Czech Republic and Slovak Republic) in
innovation and technology transfer policies during economic transition and the challenges faced
during EU enlargement.
Innovation and technology transfer are the key drivers of economic growth in todays world
economy. Thus an appropriate economic policy should concentrate on strengthening these processes
throughout the country and easing the flow of information and technology between the main players
innovators, companies, state agencies and financial institutions.
Transition economies are the special case. Most of Central and Eastern Europe countries
experienced large GDP declines in the 1990s which was resulted from large extent from an overall
decline in competitiveness and increasing technology gap in comparison to western countries. This
may imply certain difficulties taking into consideration the integration process with the European
Union and associated with it specific circumstances like liberalisation of trade and production factor
flow between member countries (e.g. capital, labour and technology).
The paper consists of both theoretical and practical issues. The first part of the paper describes the
relations between innovation and technology transfer and economic growth with a concentrating on
the path of economic growth for transition countries and key differences in comparison with more
economically advanced economies. This built a framework for conducting a more empirical
analysis of appropriate processes in particular countries.
1 Specifics of Technology Transfer and the Innovation Process
Technology transfer is a key factor strongly impacting on economic growth both in the short and
long term. The access to technology and its usage in economic processes to large extent decides as
to the competitive position in the international labour division.
Structural changes of the entire economy are almost not possible without an effective technology
transfer and well-defined countrys innovation system. These two factors led the spectacular
(despite current problems) improvement in competitiveness and economic success of the newlyindustrialised Asian Pacific economies.
Technology transfer is a complicated process, which includes several closely related elements like
technology (embodied and disembodied; e.g. subparts / machines, patents / licences) and knowledge
(e.g. organisational behaviour). Sometimes transfer technology is being understood in parallel to
innovation where the latter embodies of specific knowledge of a product or service.
Technology transfer can be defined as a flow between technology owner/holder and technology
buyer/user. It enables closing the gap in access to particular technology in different ways: buying,
renting, lending or licensing. An important element strictly related to technology transfer is the
technology commercialisation which is a technology transfer with a special emphasis on practical
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usage of R&D efforts (e.g. closing a licence agreement with patent owner to exploit technology of a
specific product design).
The scale of diffusion of the transferred technology depends to a large extent on existing technology
infrastructure e.g. the resources of the technical science and R&D potential, industrial production
advancement, technology start-ups and technology transfer financing system, instruments
encouraging the culture innovation across the country, the scale of the countrys openess to foreign
competition and production co-operation (at the beginning mainly transnational corporations
channels). Economic level is one of most important factors determining the intensity of technology
transfer. In effect the diversity in the level of quality and quantity of labour factors will be strictly
correlated with the potential flow of technology.
Technology transfer can have both a vertical and horizontal character. The vertical technology flow
is taking place across particular stages of added value creation in the value chain:
R&D implementation production process distribution final buyer
Horizontal technology transfer is conducted in similar production stages or economic environments
typical in the diffusion process:
laboratory laboratory; factory factory; country country
Technology transfer channels can transfer goods, services and production factors (workforce,
technology, capital). In this context investments related to technology transfer are analysed as
investments directly related to production (e.g. machinery) and partially related to production (e.g.
distribution equipment).
Innovation and Technology Supply
Technology supply depends to a large extent on innovation the capabilities of a particular country
or the so-called innovation potential. Innovation should be broadly understood as everything, which
is considered as a new. Innovation is the result of the practical primary usage of certain idea. It is
the embodied in a range of processes or products; thus we can distinguish process and product
innovations. For an example, the innovation process can be analysed as in Box 1.
Box 1. Innovation process scheme
(1) R&D (basic and applied research) (2) invention (creation and documentation of technology) (3)
innovation and technology implementation (4) learning of effective technology usage (5)
optimisitation of production and organisation methods (6) appearing of micro and macroeconomic
effects of technology implementation (eg. lower material and personal costs needs, higher productivity)
The innovation potential of particular country is the sum of specific macro and microeconomic
factors, which encourage the process of innovation like income per capita, R&D, technology
infrastructure. Technology transfer indicators can be based on the foreign trade specifics and
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international competitiveness1. In this context, they can include e.g. prices in export, shares in
appropriate international markets etc. One of the most often used indicators as to the intensity of
technology transfer is the technology gap, which can be understood as difference between
knowledge and capabilities of a particular country. There are several possibilities to define and
measure the technology gap which include comparisons of industries labour productivity and
capital intensities2
. An interesting indicator is the level of profit generated in a single country byforeign enterprises3.
The national technology transfer system can consist of several entities. The most important of
which are innovators (technology creators), commercialisators (companies) and central government
institutions (economic policy). A detailed technology transfer follows:
Picture 1 Technology transfer and innovation system participants
Technology transfer channels
Technology transfer channels are the medium between particular participants in the process. They
include ways of gaining the technology (e.g. buying, lending) and other important factors related to
the process (e.g. flow of people, documentation, products, and capital).
Technology transfer is conducted through different channels and different entities. Depending on
the means of creating and gaining of the technology its transfer can be considered either internal or
external. Internal technology transfer is conducted mostly inside a single entity or its affiliates. This
entity acts both as creator / innovator and user. The scope of internal process is limited by internal
1 see Durand M., Giorno C., Indicators of International Competitiveness ... in OECD Economic Studies 9/1987.2 Sjoholm F., Technology Gap and Spillovers from Direct Foreign Investment, Stockholm School of Economics,Working Paper 212/1997, p. 9.3
Blomstrom M., Kokko A., Country Competition and Technology Transfer by Multinationals, Stockholm School ofEconomics, Working Paper 4131/1992, p. 4.
government institutions
(goals and resources of innovation
policy; legal affairs)
R&D institutes
(basic and applied research)
Higher education
(R&D)
Financial institutions
(Venture Capital funds, banks, public
funds)
Technology transfer brokers
(incubators, technology parks)
Small and medium enterprises
(technology implementation)
Large industry
(technology implementation and
ex ort
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R&D resources and implementation capabilities. External technology transfer relies on external
technology resources usually not related to buyer.
The scale of advancement in technology transfer depends on the advancement of R&D resources
and the capabilities for technology implementation in the production process of the transferee4. As a
result there are several possibilities for gaining technologies related to specifics of technology
transfer participants.
Table 1. Technology acquisition schemes
1. Acquiring non-documented knowledge I
2. Internal R&D I
3. Reverse engineering I
4. Secret acquiring trough internal R&D I+E
5. Contract R&D I+E
6. Strategic R&D partnership I+E
7. Licensing E
8. Purchase (domestic or foreign) E
9. Joint Venture E
10. Acquisition of a company with technology EI... technology transfer based mainly on internal R&D capabilitiesE... technology transfer based mainly on external R&D capabilities
Source: UNIDO, Technology Management, 2000.
Most advanced technology transfer, especially in the low and middle-income economies, is
conducted through international production co-operation, where the production factors flow is most
complex including machinery, semi-finished goods and production factors (workforce, technology
and capital). The spillover effects to other parts of the economy related to this form of technologytransfer are also the largest. Foreign direct investments as one of most widely used channels of
international production co-operation to large extend decide about the location and level complexity
of technology transfer. Thus a long-term economic policy is needed.
2 Technology and Economic Growth - Theoretical Issues
Complexity of technology transfer imply construction of the theoretical model. An interesting basis
could be existing international trade and capital flows theories assuming differentiation of
production factors supply (workforce, capital, and technology) across countries and regions.
This can be extended by neotechnology theories like product life cycle theory, technology gap
theory and production scale theory. They argue that the cause of foreign trade is possible thanks to
existing differences of supply of production factors across countries. In technology gap theory
foreign trade is possible thanks to differences in economic development across countries; in
production scale theory the gain and competitive share is possible due to high specialisation and
decrease of costs per produced unit.
4see Gurbiel R., Moliwoci finansowania transferu technologii w Polsce /Possibilities of Technology Transfer
Financing in Poland/ in Technology Transfer - The Polish Perspective (conference paper), IPPT PAN/WS Atkins,Warszawa 1997.
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One of the theories, which can be applied in technology transfer analysis, is the R.Vernons product
life cycle theory. Vernon argues that reasons for foreign trade are technological advantages, which
are embodied in innovations. Because the access to the core technologies is limited, innovations are
spreading gradually and differently across countries from country innovator to country imitator
(receiving country). One of the reasons for this is that countries differ in the levels of economic
development and technology. Vernons theory assume time as a factor of gradual evolution ofproduct (from innovation, growth, maturity to decline); markets (from country innovator to country
imitator) and production process (from complexity to standardisation).
Dynamics of technology transfer depend also on the strategy of a particular firm innovator. Some
firms prefer expansion by technology licensing others through foreign direct investment as the most
appropriate and safest solution for securing the technology and to prolong the rent from the
exclusivity of ownership.
According to product life cycle theory, production is being moved from the country innovator to
country imitator at the products maturity stage. In the first stage of product development the
production process is being conducted in the country of innovator (because of specifics of supply of
production factors and the character of local market demand). In the second stage, together with
diffusion of products, some export activities are established to middle developed countries. In the
third stage full technology diffusion takes place. Production process simplifies when the innovator
fails to resist its oligopolistic position.
This often leads to move production to foreign countries in order to find relative cheaper production
factors, to ensure better service of foreign markets and to internalise possessed technology.
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Picture 2. Intensity of technology flows in the product life cycle theory
Source: based on Vernon R.,International Investment and International Trade in Product Cycle in Buckley P. (ed.),Internalisation of the Firm, Academic Press, London 1993.
Technical progress is the key factor in economic development and decreasing the technology gap
between countries. The intensity of technology transfer depends mainly on innovation potential of a
receiving country. The more advanced it is the more complicated the transfer will be.
The level of economic development is one of the main factors determining the intensity of
technology transfer.
Production volume
Time
Export
Export
Export
Import
Import
Import
Highly developed countries (innovators; USA, Japan, Korea, EU countries)
Middle developed countries (early followers; Central and Eastern Europe
countries)
Low developed countries (late followers; Middle East Countries)
innovation growth standarisation
Technology
transfer intensity
production
consumption
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Picture 3. Technology inflow specifics and countrys innovation capabilities
Source: based on The Interrelationship Between Investment Flows and Technology Transfer, UN, 1992, p. 14 .
To ensure the effects of the technology transfer and its intensity a strengthening the process byappropriate economic policy instruments. As we can see in Picture 3, there is a high correlation
between the intensity of technology transfer and a countrys innovation capabilities. As a an
example of the linkage between technology transfer and the economic policy; we can mention
development path of some Asian countries like Korea, Taiwan, Hong-Kong, Singapore. These
countries emerged in just a few decades as technology and production based powerhouses.
Aggressive technology acquisition and its efficient use in production processes played key role in
the economic development with a long-term goal to increase international competitiveness position.
Development of innovation potential followed the main policy of economic development, which
could be broadly characterised as moving from import substitution to export promotion. Protectionof local imports and strict import policies enabled to acquire basic technologies mainly through
import (some were acquired by licensing and foreign direct investments conducted mainly through
joint ventures, which were used as a vehicle to assimilate the technology). Once acquired
technologies were further developed using local R&D capabilities, based on broad linkages between
state and private research institutes.
Despite economic problems in the late 90-s Asian countries can be analysed as example of
transition from country imitator to innovator scheme. However a very different international
environment now precludes directly following this development path by other countries like
Central and Eastern Europe which faces a much more open market environment.
3 Competitiveness Central and Eastern Europe Technology Gap
3.1 CEE in the Competitiveness Ratings
Competitiveness of the economy in the long term depends on innovation potential of the economy
gained through effective technology transfer5. It is the key factor taking into account equalisation of
traditional competitiveness factors like cost of production factors6.
5see OECD, Benchmarking Industry-Science Relationships, 2002.
Innovation
capabilities
Base
technologies
Innovation
technologies
Adaptive
technologies
Imitating
technologies
Technology transfer intensity
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The ownership and access to crucial technologies affects a countrys position of certain country in
the international competitiveness ratings. Without having home-developed technologies the
competing in the long term would be based on generally accessible technologies, mainly through
better use of an imported technology. This is especially important in the case of Central and Eastern
Europe Countries, which definitely lag behind more developed countries in the level of
competitiveness.
Table 2. Change in the international competitiveness position
1997 1998 1999 2000 2001
USA 1 1 1 1 1
Singapore 2 2 2 2 2
Finland 7 6 5 4 3
Luxembourg 8 3 3 6 4
Holland 4 4 4 3 5
Hong Kong 3 5 6 12 6Ireland 10 7 8 5 7
Sweden 19 16 14 14 8
Central and Eastern Europe Countries
Hungary 37 28 26 26 27
Czech Republic 33 37 37 40 35
Slovakia - - - - 37
Slovenia - - 39 36 39
Russia 46 43 46 47 45
Poland 43 44 40 38 47
Source: based on IMD, World Competitiveness Yearbook 2001.
In the competitiveness research mentioned above conducted in 1997-2001 by IMD only few Central
and Eastern Europe countries have improved their ratings position. The largest improvement in the
rating was achieved by Hungary moving from 37th to 27th position. The second best country was
the Czech Republic, which balanced between 35-40 position. It is interesting to mention that its best
position was achieved by the country in 1997. The worst 47th position occupies Poland, which
failed to make any significant changes in the ranking since its first listing in 1997.
It is clear that CEE lags behind most developed countries from the OECD group. Prolonging this
situation in the long term will have a negative impact on future economic development. Especially
taking into account the changes in the world economy like increasing competitiveness from newly
industrialised countries (the traditional ones like Korea or Taiwan; but also new players like China
or India).
6see Gurbiel R., Dezintegracja a zagraniczne inwestycje bezporednie i transfer technologii. Przypadek podziau
Czechosowacji /Disintegration and Foreign Direct Investment and Technology Transfer. Case of the Split ofCzechoslowakia/, SEMPER, Warszawa 2001.
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3.2 Finland a New Technology Powerhouse
In just ten years, Finland has become one of most innovative countries of EU. This was possible
due to changes in attitude to innovation, technology transfer and promoting linkages between R&D
sector and industry.
In 1999, the share of R&D expenditures in GDP exceeded 3%, which ranked Finland in the second place in OECD countries only after Sweden. The total value of R&D expenditures amounted in
1999 to approximately EUR 3,7 billion three times as much as in Poland. About 69% was spent
by private companies, which were dominated by the electronics and telecommunication industry.
Picture 4. Finlands R&D Expenditure to GDP and GDP Growth
Source: Finland Statistical Office
Finland is characterised by a large number of R&D personnel employed both in public funded
research institutions and private companies. At the end of the 90-s there were engaged more than 60
thousand of research personnel (53% business sector, 30% universities, 17% other public funded
institutions).
-7%
-2%
3%
R&D/GDP 1,9% 2,0% 2,2% 2,3% 2,7% 2,9% 3,1%
GDP growth 0,0% -6,3% 1,1% 3,8% 6,3% 5,3% 4,2%
1990 1991 1993 1995 1997 1998 1999
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Picture 5. International R&D Position of Finland at the end of 90-s
Source: based on Science, Technology and Industry Scoreboard, OECD 1999, p. 1,2.
4 Central and Eastern Europe Innovation Potential Constraints and
Challenges
R&D is the key element in the innovation and technology transfer process that decides about long-
term economic development. Thanks to R&D expenditures new products and processes can be
created. Thus their share of a governments central budget is highly significant.
Historically Central and Eastern European countries were clearly interested in their own R&Ddevelopment. This was a result of cold war and sustaining the military potential. However
concentration on military technologies without any transfer of these achievements into commercial
implementations had a negative impact on the whole economy. Opening the previously closed
economies was a kind of shock for local companies that were unable to compete.
Czech and Slovak Republics
Like other socialist countries Czechoslovakia built its R&D system based upon the Soviet model,
which consisted of the Czechoslovak Academy of Sciences, R&D branch institutes (divided as:
independent institutions, institutions belonging to industry, institutions belong to governmentagencies) and university research units
7.
R&D expenditures in the 70s and 80s exceeded 2% of GDP. The number of personnel
professionally engaged in workforce amounted to 200 thousand with approx. a thousand research
units.
The economic transition, which started in 1989, also strongly influenced the research sector. There
was conducted deep restructuring, involving the introduction of competitive mechanisms based on
granted projects, closure of some non-performing institutes, and some were privatised.
7Muller K., "Scenario for the transformation of science, technology and education" in Kukliski A. (ed.),
Sceince,Technology,Economy, KBN, Warszawa 1994, s.448-449.
0
10
20
30
40
50
60
70
80
90
100
0,0 0,5 1,0 1,5 2,0 2,5 3,0 3,5 4,0 4,5
Griece
PolandCzech Rp.
UEOECD
Japan
USA
Finland (1997) Sweden
No. of R&D personnel to 10 000 of employees
R&D expenditures to GDP
Finland 1990
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A significant shortage of funds and lack of assimilation to the new market conditions decreased the
research base. In just two years after start of transition, in Czechoslovakia in 1989-1991 the number
of researchers decreased 36% (in Czech region 38%, in Slovakia 32%) and R&D institutes 37%8.
The total financing of research sector decreased about 46% (in Czech Republic 42%; Slovakia
53%)9. The large number of R&D institutes changed its orientation into more commercial forms,
however based on research activity. Several institutes started small-scale production based on in-house developed technologies.
The split of Czechoslovakia into the separated countries of the Czech and Slovak Republics resulted
in some changes in the R&D sector as well. One of the main results was the end of federal research
programs and central directives for science policy. This automatically decreased the flow of funds
and co-operation efforts between Czech and Slovak R&D institutions.
The late 90-s did not bring a radical improvement to the science sector in the Czech Republic. In
2000 comparing to 1990 there were 50% less people involved in the R&D development (decrease
from 105,9 to 53,5 thousand). Since 1994 the share of public spending on R&D did not exceed
50%. The steadily growing share was represented by private sector. In 2000 R&D expenditures
were financed 44,5% from public funds (government and universities) and 45,0% from private
funds. About 3,1% funds came from foreign sources. All of these funds are low compared to GDP
but on the other hand this ratio is relatively high comparing to other Central and Eastern Europe
countries.
Similar negative trends were characteristic also in Slovakia where after the split were the funding
and employment decrease was significantly higher. One of the reasons for this was a specifics of the
Slovak economy, which was based on heavy machinery production and chemicals industry
(including military industry) which were largely weakened after the quick market opening in the
first years of transition period.
Table 3. R&D expenditures to GDP
1994 1995 1995 1997 1998 1999
Czech Republic 1,10% 1,01% 1,03% 1,17% 1,27% 1,29%
Hungary 0,88% 0,73% 0,65% 0,72% 0,68% 0,68%
Poland 0,76% 0,69% 0,71% 0,71% 0,72% 0,75%
Slovak Republic 0,96% 0,98% 0,97% 1,13% 0,82% 0,68%
European Union 1,83% 1,81% 1,81% 1,80% 1,81% 1,85%
Source: OECD, Main Science and Technology Indicators, 2001/1, p. 16.
To encourage technology transfer there were several instruments used like business incubators,
technology transfer brokerage, technology parks (more than 12 in the Czech Republic); Business
Innovation Centres co-operating with European Union institutions.
Poland
Poland faced similar problem of R&D transition like other CEE countries. In 1995-2000 the number
of research staff decreased 6% from 83,6 to 78,9 thousand. This was followed by low values of
8Reviews of national science and technology policy:Czech and Slovak Federal Republic, OECD 1992, p. 35,36.
9Statistical Yearbook of CSFR, CSU, 1991, p.252.
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funds spent on research. Since the beginning of transition in the share of gross domestic
expenditures on R&D to GDP did not exceed 1%. In 2000 this ratio amounted to only 0,7% which
was significantly less than EU average.
The decrease of R&D efforts had a negative impact on the number of patent applications, which in
the period 1990-2000 decreased more than 60% from 4105 to 2404 (there were granted
appropriately 3242 and 939 patents). In the same time, there was a large increase in non-resident
foreign patent applications from 1316 to 4894.
One of the effects of decreasing in innovation potential is a widening gap in international
transactions related to scientific and technological developments, which is presented in table below.
Table 4. R&D balance of payments (USD million)1991 1995 1999 2000
export 9,4 6,2 21,0 23,8
import 5,8 23,1 347,1 457,9
(export-import) 3,6 -16,9 -326,1 -434,1
Source: See Statistical Yearbook of the Republic of Poland, 2001, p. 320.
The main weakness of Polish R&D system is a lack of effective technology transfer between
research and industry sector. This is a complex issue strictly correlated to the specifics of the Polish
economy, dominated (by share in production; year 2000 data)10
by rather low and middle
technology intensive industries like - food and tobacco products manufacturing (17,8%), energy and
water supply (8,7%), motor vehicles manufacturing (6,3%), chemicals products manufacturing
(5,8%). Most of these industries use import as the main transfer technology channel thus limiting
the demand for in-house R&D, which is used mostly for implementation purposes.
Recent reforms of R&D institutes did not change much the situation. Most of them have to deal
with a lack of funds to undertake necessary investments, which is a barrier to offer a competitive
supply of technology. In 2000 the existing research equipment was depreciated by 69%. New ideas
like technology parks and innovation centres are not sufficient to encourage rapid growth of
innovation potential.
Foreign direct investment as a significant channel for technology transfer
The success of the transition process of Central and Eastern Europe Countries was largely possibledue foreign direct investment inflow, which transformed the entire economies. It is because it
represents the highest form of international production co-operation engaging the broadest spectrum
of resources capital, technology/knowledge and skilled workforce. Transnational corporations
brought not only fierce competition, which forced many local companies to restructure but also
technology and innovativeness, which spilled over to local industries.
Till 2000 in Central and Eastern Europe was invested about USD 124,7 billion mostly by large
transnational corporations which entered the local markets mostly buying local major companies.
This strategy is steadily changing. Finished privatisations and lack of healthy local companies to
10Statistical Yearbook of Industry of the Republic of Poland, 2001, p. 44-46.
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acquire forced many large international companies to start greenfield investments, which have been
especially invited by local authorities.
Table 5. FDI inflow to selected CEE countries (USD million)
1989-1994
(annual
average)
1995 1996 1997 1998 1999 2000
Central and Eastern Europe 3 444 14 268 12 730 19 188 21 008 23 222 25 419
Growth rate of FDI inflow
(%)
314,3% -10,8% 50,7% 9,5% 10,5% 9,5%
Czech Republic 563 2 562 1 428 1 300 3 718 6 324 4 595
Hungary 1 152 4 453 2 275 2 173 2 036 1 944 1 957
Poland 788 3 659 4 498 4 908 6 365 7 270 10 000
Slovak Republic 137 195 251 206 631 356 2 075
Belarus 12 15 105 352 203 444 90
Lithuania 24 73 152 355 926 486 379
Russia 850 2 016 2 479 6 638 2 761 3 309 2 704
Ukraine 186 267 521 624 743 496 595
Source: UNCTAD, World Investment Report 2001.
An interesting case of technology transfer through FDI appears in the Czech electronics
manufacturing sector, which up until now attracted more than 200 of foreign companies. The total
amount of FDI invested in the sector exceeded in 2001 the amount of USD 570 million. The high
inflow of technology based foreign enterprises was mainly a general effect of friendly FDI
regulation offering broad spectrum of incentives and attractive business environment (e.g. relativelycheap and educated workforce, long tradition in electronics manufacturing). Good results from the
initial investments encouraged some investors to locate in the Czech Republic part of their R&D
activities (including Motorola, Rockwell Automation, Honeywell and Vitatron).
Table 6 Largest foreign investors in the Czech electronics manufacturing sectorINVESTOR COUNTRY OF
ORIGIN
TYPE OF
BUSINESS
TOTAL
INVESTME
NT
(mil.USD)
NO. OF
EMPLOYEES
TIME
Matsushita Electric Industrial Co. Japan Consumer
electronics
72,6 1 440 2000
ON Semiconductor USA Electronics 55,0 500 1992
AVX Limited U.K. Electronics 50,0 3 400 1992
UPC United-Europe Communications Netherlands Cable TV 45 520 1996
Epcos AG Germany Ferrites 43,2 510 1999
Foxconn Holdings B.V. Taiwan PC 40,0 2 200 2000
Tyco Group S.a.R. Luxembourg connectors 35,5 1 800 1993/2000
Liechtex Establishment Liechtenstein Electromotors 28,0 80 1992
Ralston Purina USA Batteries 26,0 200 1991
AEG Kondensatoren und WadlerGmbH
Germany Capacitors 25,o 280 1999
Schneider Electric SA France Electronicscomponents
22,0 150 1993
Vishay Europe GmbH Germany Electronics 20,0 550 1991
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components
Flextronics International USA Electronics 20,0 1 500 2000
Punch International Belgium Electronics 17,0 NA NA
Invensys Luxembourg air conditioner,washing machines
16,6 320 2000
ELCERAM Electronics 16,0 130 2001
Infineon Technologies AG Netherlands PC and equipment 15,0 700 1999Cherry GmbH Germany PC and equipment 14,5 1 000 1992
Black & Decker USA Power tools 12,0 600 2002
Source: CzechInvest
5 Summary
Innovation and technology transfer have strong impact on economic development and increase in
international competitiveness level of the economy.
Despite some progress made in recent years Central and Eastern European countries still lag behind
many of their European Union neighbours. Thus limiting of the technology gap between Central
and Eastern Europe countries and EU is of crucial importance to the success of integration process.
Because of lacking of effective technology transfer from R&D sector to industry, import and
foreign direct investments are the main channels of technology transfer in transition countries.
There is a strong need of securing funds for local R&D sector and to promote the linkages between
the sector and industry.
To encourage innovation philosophy across CEE countries an appropriate economic policy is
needed. This include e.g. tax instruments, limiting complicated administration procedures, building
and financing technology transfer institutions (business incubators, technology parks) and attracting
venture capital investors.
A significant opportunity for development of R&D sector in transition countries will offer
integration with EU, which enable to access to increasing possibilities in participation of EU funded
research programmes.
A recent study conducted on innovation potential summarised specifics of innovation profiles of EUcandidates countries as follows:
Box 2. Innovation Profile Specifics of Selected CEE Countries
Czech Republic
Innovation Drivers and Resources
Tradition of production cooperation in industry
FDI plays a role in providing advanced learning opportunities of workforce
Industry science relationships exist and are growing in recent years Positive, indirect role played by non-govermental organisations
Growing supply of risk capital
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Innovation Constraints
technology spin-offs from foreign-owned firms are limited
still lack of bridges between academic and industrial sectors
Innovation Policy Challenges
establish an integrated policy for framework policy
develop a legal framework favouring linkages and spin-off effects
introduce tax incentives for R&D and innovation
Poland
Innovation Drivers and Resources
long tradition of small scale entrepreneurship
growing innovation in manufacturing sector, mainly through acquisition of technology
large availability of business support organisations
Innovation Constraints
limited access to capital
low diffusion of quality and innovation oriented management techniques
relatively few links between research organisations and firms
danger of becoming branch plant economy with few foreign owned companies locating research or
strategic management functions
Innovation Policy Challenges
develop policy monitoring and evaluation practices
rationalise innovation support infrastructure
support labour market training
Hungary
Innovation Drivers and Resources
FDI brings in new products and processes
Suppliers networks around FDI help upgrade domestic firms
Availability of skilled people for industrial activities
Improving relationships between research sector and industry
Innovation Constraints
Foreign controlled firms rely on developments in parent company
Lack of venture capital activities
Innovation Policy Challenges
Secure funding for applied R&D
Envisage fiscal incentives for start-ups
Ensure effective take off of venture capital supply
Source: see Innovation Policy in Six Candidate Countries: the Challenges Cyprus, Czech Republic, Estonia,Hungary, Poland and Slovenia, September 2001, p. 24-41.
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