Hungary: Innovation and economic development – current state and perspectives

On 16 December 2011, the Hungarian National Innovation Office reported about the conference entitled “Innovation and Economic Development” which took place on 8th of December 2011. The conference provided a forum for discussing whether Hungary can become one of the most innovative countries in Europe and what are the major challenges ahead of the Hungarian innovation policy.

The conference has underpinned the importance of innovation in catalysing and driving the economic development. One of the most pertinent insights was that thousands of new jobs in the field of research and development would be needed in Hungary so that participating in the competition for EU funds would be more successful. Hungary’s R&D expenditures do not reach the EU average (1.8% of the GDP). This per se poses the issue of the country’s absorptive capacity which has to be further developed, whereby the expenditures allocated to R&D would be utilised in a more useful way and, if the fiscal conditions allow, higher amount of resources could be successfully absorbed.  

As the director of the Hungarian National Innovation Office said: “We can assume that a more solid financial background for innovation will be available from 2012, since the financial sources stemming from the Hungary's Innovation Fund will be opened.”

There were some voices from the side of the government echoing that the inherited and thus weakly performing R&D related financing system will be to a large extent restructured and transparently regulated from next year in which the role of the National Innovation Office will be considerable important.

Beside the above mentioned, participants of the conference have also emphasised the role of cooperation within the business activities let we consider either SMEs or multinational enterprises. It is crucial, because 50% of the Hungarian GDP is given by multinationals. As a consequence, the policy has to pursue the way of increasing or at least preserving the current level of business performance of large and multinational enterprises and, in parallel, policy should also foster innovative and high-growth SMEs in becoming greater contributor to the Hungarian GDP.

According to the estimates, there are barely thousands of innovative firms in Hungary. In an effort to enhance their performance and number, the policy has to consider relatively new types of measures and initiatives. For example, spin-offs and start-ups need to be embedded in virtual technology incubators as well, what is more, they demand venture capital, extensive opportunity for tendering and last but not at all least, they also require innovation brokers.

As far as the current state of Hungary is concerned in this regard, the major messages of the speakers can be juxtaposed as follows:

• The Hungarian societal and business environment are not so innovation-friendly;
• There is no significant institution that would seed capital;
• In practice, the lack of industrial research network is a strong feature of the economy;
• There is much room for improvement in case of the effectiveness of the national innovation system.

In response to the challenges, the National Innovation Office aims to set up a Scientific and Technology Observatories which would be able to collect and sort the necessary information on the basis of different aspects and thus it would provide a supporting hand for the planning of development in the fields of innovation and innovation management.  

Beyond the establishment of a state-of-the-art model for supporting innovation management, the following tasks have to be done:

• developing special projects and programmes;
• establishing capital funds to seed the projects being in early stages;
• protecting the intellectual property in a more vigorous way;

The major message of the conference was that Hungary has a chance to foster R&D and innovation and hence the economic development, but it needs a permanent and meaningful cooperation among relevant actors like the National Innovation Office and Regional Innovation Agencies.

Reference/further readings:

About the conference on: “Innovation and Economic Development” (presentation are available in Hungarian) (http://www.innoreg.hu/ptPortal/index.php?mod=news&action=showNews&newsid=12260&lang=hu)

Regional Innovation Agencies (in Hungarian) (http://www.riunet.hu/)