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Structural Challenges and Integration to the EU’s Knowledge Markets

The European Commission’s (2015b) annual country reports on research and innovation (R&I) identified a number of persistent challenges for the V4 countries. There is weak national funding and underdeveloped public-private collaboration, as well as the low embeddedness of MNCs in the national economy, and low co-operation between MNCs and national universities and research centres. This is compounded by underdeveloped and/or unstable systems of R&I governance. Other weaknesses include low levels of innovativeness amongst domestic small and medium-sized companies (SMEs), lack of a clear thematic focus in publicly funded research, and hesitant integration of national R&I systems into the European Research Area - for example, low participation in the framework programmes, and in European joint technology initiatives and partnerships.

Some of these structural challenges stem from the history of economic development in the 1990s and early 2000s. The MNCs entered the V4 markets principally because of the low effective costs of production inputs, labour costs in particular. They have tended to retain their research activities and other knowledge-intensive services in their headquarters. Eurostat data on sources of GERD finance do indicate a gradual shift towards more sophisticated activities in the v4 countries, in the Czech Republic and Hungary in particular. However, both the MNCs and domestic enterprises had to cope with a weak supply of high-quality research resources in the V4 countries. Business-oriented research largely disappeared during the turbulent 1990s. Universities and government research facilities tried to insulate themselves from market forces and refocused their attention on basic research and mass education. Research excellence was limited.

There were mixed trends in the internationalisation of R&D in the v4 countries. The Czech Republic and Hungary achieved average success rates in FP7 research projects in 2007-2014, but Poland and Slovakia had quite low success rates. All the V4 countries accounted for below-average patenting activity rates and high-quality scientific publications in the mid-2010s (Table 5.5). Researchers from the CEE countries were also more likely to publish in their national languages and received relatively less citations per paper than authors from the EU15. This may reflect ‘poorer knowledge of publication standards and publication strategies as well as inadequate levels of proficiency in English, but also perhaps poorer standards of research resulting, inter alia, from weaker international collaboration’ in the CEE countries (Ploszaj and Olechnicka 2015, p. 18).

Table 5.5 Selected indicators of the V4 and southern EU member countries in research and innovation

Year*

GERD, % GDP

BERD, % GDP

Top

publications

Patents

KIBS

exports

Innovative

SMEs

CZ

2005

1.17

0.73

4.9

0.72

31.6

35.5

2014

1.91

1.03

5.6

0.79

35.2

30.9

HU

2005

0.93

0.41

4.8

1.38

21.0

17.6

2014

1.41

0.98

5.3

1.49

28.8

12.8

PL

2005

0.57

0.18

3.5

0.28

22.6

22.2

2014

0.87

0.38

3.8

0.42

33.6

13.1

SK

2005

0.49

0.25

2.4

0.54

15.5

19.3

2014

0.83

0.38

4.2

0.50

31.3

17.7

ES

2005

1.10

x

9.2

1.30

24.0

32.1

2014

1.24

0.66

10.4

1.57

30.0

18.4

PT

2005

0.76

0.30

9.0

0.26

22.8

38.6

2014

1.36

0.65

9.9

0.67

35.5

38.3

EL

2005

0.58

x

8.9

0.28

x

34.5

2014

0.80

0.50

9.2

0.35

53.9

29.6

V4 avg

2005

0.79

0.39

3.9

0.73

22.7

23.7

2014

1.26

0.69

4.7

0.80

32.2

18.6

South

2005

0.81

x

9.0

0.61

x

35.1

avg

2014

1.13

0.60

9.8

0.86

39.8

28.8

EU28

2014*

2.01

1.29

11.0

3.38

49.5

30.6

Notes: * = or the latest available year. GERD = gross expenditure on research and development; BERD = business expenditure on research and development; top publications = scientific publications within the 10% most cited scientific publications worldwide as percent of total scientific publications of the country; KIBS exports = knowledge-intensive services exports as percent of total service exports; patents = PCT patent applications per billion GDP in current PPS (EUR); innovative SMEs introducing product or process innovations as percent ofSMEs. Simple averages for the V4 and southern EU members.

Sources: European Commission (2014): Research and Innovation performance in the EU in 2014; European Commission (2015a): Innovation Union Scoreboard 2015.

Amongst the CEE countries the Czech Republic and Hungary had the best publication results.

Some of the long-term structural challenges to national R&I systems were similar in the V4 and southern Members of the EU. The country reports on the Spanish, Portuguese and Greek national R&I systems, for example, refer to ‘fragile and unstable systems of the R&I governance’; ‘low business demand and private investment in R&I’, and ‘low innovativeness by the domestic SMEs’ (European Commission 2014).

The V4 countries have tried to overcome these weaknesses with support from the European Commission. A significant part of the structural fund resources, for example, was channelled to national R&I systems in the V4 countries. Their weak national R&I systems, however, had limited absorption capacity. In order to improve spending rates, some national governments allocated most structural funds for research-to-research infrastructure projects. Investments in research infrastructures, however, were not matched by national investments in human resources, or by necessary reforms of national R&I governance. Low levels of research excellence, and poor interconnections between the industry and academia sectors, were evident in the below-EU average values of indicators for commercial and non-commercial research outputs (Table 5.5).

 
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