Servicio de Información Comunitario sobre Investigación y Desarrollo - CORDIS

S&T/R&D systems and growth in the CEECs

The period of post-socialist transformation of the CEE continues to be characterised by a large gap between a high level of R&D potential and labour force skills on the one hand, and results, in terms of growth and restructuring, on the other. During this period, all CEECs have seen a significant reduction of their R&D systems in terms of expenditure and personnel, which does not seem to be directly linked to growth. The lack of direct links between S&T inputs and outputs and growth and recovery in the CEECs suggests that sources of growth in the CEECs during the 1990s have not been directly linked to R&D activities, a trend confirmed by both sectoral evidence and country analyses of S&T systems. This seems to suggest that growth seems linked more to knowledge acquisition in the production process and through different forms of firm-based learning (learning by doing, learning by exporting, and interacting). The contribution of R&D/S&T systems in this case has been indirect - through skilled graduates, technological problem solving, and the creation of new firms.

Contrary to the commonly held view of ever-present inefficiencies in R&D, the relative size of R&D in the CEECs is reflected in such outputs as patents and publications: Significantly downsized R&D systems still produce a volume of patents and papers that broadly reflects the CEECs’ investment in R&D. This suggests that the major inefficiencies in the growth mechanism of the CEECs lie in the transformation of R&D results into commercial values. Thus the problem in the CEECs seems to be not one of supply of R&D, but, rather, one of demand for R&D and of quality of supply. Data suggest that the role of these countries’ industrial structures and historical heritage in maintaining R&D investments and outputs is greater than current income levels would suggest.

Trade data, combined with R&D and patent data, indicate the possibility of a CEEC-specific dual pattern of adjustment, whereby progress occurs in parallel both in labour-intensive traditional industries and in specialised supplier industries. The latter are not based on science but on a skilled workforce, usually with strong competencies in the mechanical technologies. It seems that the CEECs will not follow the East Asian pattern - from labour to capital and then technology intensive industries. This seeming CEEC specificity, which remains to be proven, can be explained as the result of inherited capabilities in design and mechanical technologies.

Trade data at detailed product levels confirm the parallel adjustment along several technological levels of product structure in exports. These are:
- Strengthened export patterns in labour-intensive industries, like clothing and footwear, in all CEECs;

- The emergence of technology-intensive exports in transport machinery and of electronic and electrical products, especially in Hungary and the Czech Republic;

- The adherence to the previous strong export orientation in commodities; this remains an important part of the export product spectrum, but accounts for the most substantial share of exports only in Bulgaria.

The basis for the catching-up process of the CEECs on world-frontier patentable innovation is rather tenuous. The remaining strengths are in specific areas rather than across broad sectors or even an entire industry. This means that the possibilities for patterns recombining world frontier R&D, design, and manufacturing capabilities are not likely on a large scale but seem probable in those specific sectors in which these economies still have world-frontier patentable inventions. On the other hand, the level of human capital, the size of the R&D systems, and the design and engineering capacities indicate that the CEECs may develop imitative capabilities not only in manufacturing but also in R&D and design.

The physical capital stock of the central and eastern European (CEE) economies, its technological structure and technology (R&D) capital was removed from market economy structures. This generated a rather unbalanced structure of assets, in which some, for example, physical assets, design capabilities, or engineering, are in abundance while others, like finance, quality management or industrial software, are in short supply. The unbalanced nature of assets of the CEECs is also evident in the structure of their technology capital.

The CEECs’ technological advantages are firmly rooted in their past successes and are predominantly based on metallurgical and mechanical technologies, as well as on chemicals and pharmaceuticals, while absolute and relative patent levels in electronics are marginal. In science, the CEECs’ advantages are highly concentrated in physics and chemistry and related disciplines. This in itself would not be a major problem, as minor investments in complementary assets, if available, could produce high payoffs. However, abundant assets often cannot be exploited with increasing returns due to a lack of complementary assets.

Numerous examples exist in the CEE countries to illustrate this situation, such as innovation activity constrained by a lack of physical investment; a high general education level of human capital but lacking on-the-job training investments; a poor IT infrastructure but a large, highly skilled pool of engineers; an abundance of skilled labour but an absence of foreign investors.

As a result of inherited unbalanced assets, which generated huge inefficiencies in the past, growth in the ex-socialist economies could no longer be sustained. The post-socialist era has seen a huge reallocation of assets. Indeed, the transition process has been clearly dominated by reallocations. However, growth derived from improved resource allocation will gradually diminish unless there is a ‘catching up’ process, an accumulation of technological knowledge, or an improvement in the skills of workers and engineers. A shift towards labour-intensive export industries, a fairly common feature of CEECs, may be efficient in the short term but will be inferior in the long term due to differences in accumulated knowledge.

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