National System of Innovation in Hungary
Background report for the OECD country review 2007/2008
132 Pages Posted: 14 Oct 2015 Last revised: 15 Oct 2015
Date Written: December 1, 2007
The Hungarian NIS has gone through a significant transition process since the early 1990s. The expansion of business R&D, both in terms of total expenditures and the number business R&D units, indicates a stronger base relying on which innovation capabilities can be improved, albeit from a low level. But the low hare of innovative firms and the huge difference between the foreign-owned and indigenous firms’ innovation activities highlight major challenges of the NIS. These figures suggest that Hungary continues to suffer from a dual economy syndrome: it is composed of highly productive and technologically intensive foreign-owned large firms, and fragile, financially and technologically weak indigenous SMEs. The period of 1990-2007 has not been long enough to find an appropriate position for science, technology and innovation (STI) in government policies and integrate this field effectively into an overall socio-economic development strategy. The low level of co-ordination and integration across policies results in ad hoc policy formation and implementation. In spite of the impressive number and range of STI policy measures, for most innovation performance indicators Hungary is lagging considerably behind most EU countries. A number of hypotheses can be put forward concerning the root cause of this major challenge. The most plausible one stresses the chief role of the so-called framework conditions. The macroeconomic situation, the structure of the economy, the level and type of competition, the overall entrepreneurship culture, and human resources have so unfavourable impacts on innovation activities of firms that the incentives provided by STI policy schemes cannot counterbalance those effects.
The Hungarian national innovation system is challenged by the pressing need that the country should move from the dominance of low cost economic activities towards an innovation-driven economy. Several weaknesses of the current NIS inhibit this fundamental strategic move: low demand for innovation and R&D, slow diffusion of innovations, poor co-operation capabilities, and ineffective governance.
Keywords: National innovation system; Innovation performance; STI policies; Policy coordination; Framework conditions for innovation; Business-academia cooperation; Foreign direct investment; Competition and innovation; IPR regulation; Hungary
JEL Classification: I23, I28, L53, O1, O11, O31, O34, O38, O52, P27, B15
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