Discussion Papers 2008. No. 67.
Regional Innovation System in West Transdanubia
CENTRE FOR REGIONAL STUDIES
OF HUNGARIAN ACADEMY OF SCIENCES
DISCUSSION PAPERS
No. 67
Regional Innovation System
in West Transdanubia
by
Zoltán CSIZMADIA – András GROSZ
Series editor
Zoltán GÁL
PÉCS
2008
Discussion Papers 2008. No. 67.
Regional Innovation System in West Transdanubia
ISSN 0238–2008
ISBN 978 963 9899 03 2
© Zoltán Csizmadia, András Grosz
© Centre for Regional Studies of the Hungarian Academy of Sciences
2008 by Centre for Regional Studies of the Hungarian Academy of Sciences.
Technical editor: Ilona Csapó.
Printed in Hungary by Sümegi Nyomdaipari, Kereskedelmi és Szolgáltató Ltd., Pécs.
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Discussion Papers 2008. No. 67.
Regional Innovation System in West Transdanubia
CONTENTS
11 Introduction .................................................................................................................. 5
12 The West Transdanubian Region ................................................................................. 6
13 Regional innovation policy and networking tools ........................................................ 9
14 The region’s R&D and innovation potentials ............................................................. 14
15 The innovation activities of enterprises ...................................................................... 20
16 The differentiation of innovation activities by firm groups ........................................ 26
17 Co-operation in innovation and paths of information flow ........................................ 30
18 The enterprises’ demand on innovation services ........................................................ 35
19 The supply side of the innovation system................................................................... 38
10 The evaluation of the regional innovation system ...................................................... 41
11 The future of the system – the basic components of an ideal scenario ....................... 44
References ........................................................................................................................ 46
Annex ............................................................................................................................... 48
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Discussion Papers 2008. No. 67.
Regional Innovation System in West Transdanubia
List of figures
Figure 1
Planning and Statistical Regions in Hungary and West Transdanubia ............ 8
Figure 2
Frequency of Different Type of Innovation, % of Enterprises ....................... 23
Figure 3
Factors Hampering for Innovation Activities, % of Enterprises .................... 25
Figure 4
Most Problematic Factors Regarding to the Implementation of
Innovations in West Transdanubia, % of Enterprises .................................... 26
Figure 5
The Groups of Companies by Innovativeness and Main Characteristics
of the Individual Groups (cluster centres) ...................................................... 28
Figure 6
The Probability of Co-operation with..., % of Enterprises ............................. 32
Figure 7
Most Important Cooperation Partners, % of Enterprises................................ 33
Figure 8
Frequencies of Demand Services by the Innovativeness of Enterprises ....... 37
Figure 9
Complexity of Service Demanded by the Number of Employment ............... 38
Figure 10 Evaluation of the Regional Innovation System .............................................. 42
Figure 11 Hypothetical Ideal State of the Regional Innovation Systems ....................... 43
List of tables
Table 1
The Priority Structure of the RIS for West Transdanubia .............................. 10
Table 2
Development of the Number of Researchers and Developers ........................ 16
Table 3
Development of Expenditures of Research and Development Places ............ 18
Table 4
Detailed Data of Companies in Sample, 2004–2006 ..................................... 21
Table 5
Main R&D Data of Companies in Sample, 2004–2006 ................................. 22
Table 6
Frequency of Innovation by Company Groups .............................................. 30
Table 7
Rank of Information Sources Connecting to Innovation ................................ 34
Table 8
The Frequency of Innovation Services in the 33 Organisations ..................... 40
Table 9
The Number of Services Provided by the Different Types of
Organisation ................................................................................................... 41
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1 Introduction
Responding flexibly to the permanently changing external circumstances and a
constant ability for renewal are of an utmost importance in our world having ac-
celerated and globalised during the past decades. This is true not only in the con-
text of individuals, entrepreneurs or large multinational firms but also applies to
settlements, urban areas or larger spatial units. Developments responding not only
to external processes but at the same time actively shaping them somehow by
triggering technological and organisational changes as well as by creating new
products or services may even be of higher importance. All these abilities influ-
encing competitiveness in unanimously a positive way and the activities behind
them are generally labelled by the term innovativeness or innovation. By today it
have become common that activities being in relevance somehow to the innova-
tion of firms and their supporting systems (such as infrastructure, institutional
network and policy) with the interrelationship of various actors (e.g. SME, big
firms, universities, research institutes, intermediary organisations etc.) are embed-
ded into a specific regional dimension which serves as a basis of a certain regional
innovation system. This regional innovation system can simultaneously increase the
competitiveness of the region’s businesses and of the overall region as well.
Our paper is aimed at revealing and presenting the innovation processes in
Hungary’s West Transdanubian region. Our research was based on the detailed
surveys carried out within the project ’The Foundation and Operation of Pannon
Novum West Pannon Regional Innovation Agency (WPRIA)1 ’and its results
have been published in the earlier papers of WPRIA in Hungarian language (In-
nováció a Nyugat-Dunántúlon, 2006, 2007, 2008; Csizmadia–Grosz, 2008). Be-
sides the results of these surveys we used several professional papers and publi-
cations having been prepared during the last few years on the development of the
region’s economy, innovation and development policy (EDOP, 2007, Grosz 2007,
2008; Grosz–Rechnitzer 2005; Grosz–Smahó 2007; ROP, 2007). Our research is
aimed at presenting an overview on all the major dimensions of regional innova-
tion policy. Its major segments are covering in totality the region’s innovation
environment and processes ranging from regional level campaigns affecting them,
through the activity of entrepreneurs until innovation services and the systems of
regional innovation. Our paper is going to analyse the major issues of regional
innovation as follows: a) the region’s location, information on general socio-eco-
nomic trends with special regard to the prominent role of innovation policy and its
network instruments; b) analysing the region’s innovation and research-develop-
1 Funding organisation: Hungarian National Office for Research and Technology, Budapest: Baross
Gábor Programme, 2004–2007. Project leader: Dániel Magyar, West Pannon Regional
Development Agency.
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Discussion Papers, No. 67.
ment potential (based mostly on secondary data); c) mapping the innovation ac-
tivities of the region’s business organisations (by a representative survey investi-
gating the types, the key areas and the driving forces of innovation with the major
cooperation partners); d) the innovation service demands of business enterprises
(the palette of innovation services used in the past few years and the expected de-
mands in future); e) mapping the supply side of innovation services (the actors’
objectives, their target groups, services, parallel services, missing services); and f) a
complex evaluation on the region’s innovation system and outlining an ideal system
of regional innovation (actors’ roles, relations and institutional system).
All in one this paper’s primary intention is providing a synthesis on the practical
experiences, results and inter-connections based on the three year period of research
and on the ten year experiences gained in innovation policy as well as presenting
and highlighting how an empirical ‘screening’ of a regional innovation system may
contribute to turn planning and development processes into success stories.
Before going into the details of the innovation activities of the region’s busi-
nesses and introducing its regional innovation system it would be useful by all
means to provide some background information on the area’s socio-economic
processes and on the major features of innovation environment.
2 The West Transdanubian Region
Hungary is an over-centralised state with Budapest, the capital, functioning not
only as a political but also as an economic, transport, educational, scientific and
cultural centre. By the NUTS 3 territorial level Hungary is divided into 19 coun-
ties and Budapest, which theoretically fits into the EU’s traditional sub-national
administrative system but their licenses and competences are strongly limited
especially in the fields of research, technology development and innovation.
Moreover counties are too small for serving as a catalyst for regional develop-
ment. Therefore it is the NUTS 2 planning-statistical regions to serve as the main
arenas of regional development policy.
The West Transdanubian region is one of Hungary’s seven planning-statistical
regions which although have no autonomy in self-government, i.e. no elected
board, parliament or governance and regional development councils, having been
established in 1997 and re-organised in 1999 functioning as decision-making
boards of delegated representatives through regional development agencies as the
councils’ operative organisations, are turning to be an increasingly important ter-
ritorial actors of regional development policy even if their authority scope and
financial resources are strongly limited.
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West Pannon Regional Development Council (WPRDC)2 was established by
the Act on Regional Development and Physical Planning in 1997. The Council’s
membership consists of the representative of counties, of cities with county rank,
microregions, and ministries. Its major tasks are running and management of a
competition system for decentralised funds, preparing regional plans and pro-
grammes, and coordinating economic development on regional level. West Pan-
non Regional Development Agency (WPRDA) is an organisation being in the
100% proprietary ratio of WPRDC, playing a role in formulating the future image
of West Transdanubia, being responsible for the realisation of regional develop-
ment programme, performing the tasks relevant to the responsibilities of
WPRDC, promoting and facilitating the flow of information relevant to the re-
gion’s development, fostering local and micro regional initiatives and organisa-
tions and organising and coordinating conferences, discourses and practical
training courses. During its activities the Agency built a wide-scaled cooperation
relation system with regional, governmental and international organisations.
The West Transdanubian region on Hungary’s western part comprises three
counties (Gyır-Moson-Sopron, Vas and Zala, see Figure 1) on a territory of more
than 11,000 km2 with one million inhabitants. The region has no official seat but
there are five cities with county rank on its territory (Gyır, Sopron, Szombathely,
Zalaegerszeg, Nagykanizsa) with 50–130 thousand inhabitants each; the network
of these five cities is serving as a basis for spatial development. However eco-
nomic development is concentrated rather into the region’s northern half, namely
into Gyır-Moson-Sopron County, especially into Gyır and its vicinity with 130
thousand inhabitants. Despite a moderate inflow the region’s population number
is slowly decreasing.
West Transdanubia is often referred to as Hungary’s gateway to West Europe.
It is located at the meeting point of five countries and has a common border with
Slovakia, Austria, Slovenia and Croatia. Sixty percent of Hungary’s foreign trade
flows through the West Transdanubian Region which is a proof for the region’s
very significant role in transit traffic. The western borders, the region’s proximity
to the countries of West Europe and to the West European economy are all very
important factors from the point of economic development processes and natu-
rally from the point of corporate and regional level innovation as well. For com-
panies and other organisations this specific endowment of the region offers a wide
scale of opportunities for international cooperation which may further increase the
region’s innovative potential.
2 Although the region’s official name is West Transdanubia, the majority of regional organisations
prefer using Pannonia in their English or sometimes in their Hungarian names instead of
Transdanubia. Pannonia was the original Latin name of West Hungary in the age of the Romans.
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Figure 1
Planning and Statistical Regions in Hungary and West Transdanubia
Source: Own elaboration based on Eurostat.
In the socialist era West Transdanubia was not a heavily industrialized region
so it was less dramatically hit by the crisis generated by the general recession of
the industrial sector and by the rising unemployment than Hungary’s other re-
gions. Nevertheless West Transdanubia also had some key industrial sectors in
the past which had to be renewed after the 1989 change of regime (e.g. mechani-
cal engineering, textile and food industries). In the past 15 years West Transdanu-
bia turned into Hungary’s most dynamically developing region thanks mostly to
foreign direct investments (FDI) – from Germany and Austria the neighbour state.
In 2005 the region’s per capita GDP PPS reached 63,7% of the average of the EU
27 countries. The majority of businesses settled down here are involved in motor-
vehicle and electronic industries and have significant export activities. The quick
economic restructuring process in the region had created a strong export oriented
economic structure generating a quick and dynamic growth in the economy of
West Transdanubia. There was a rapid increase in the number of businesses gen-
erating a permanent growth in the number of jobs, while unemployment rate
dropped to a very low level in comparison to other Hungarian regions and new
industrial sectors emerged beside the existing ones. However even in the late
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1990s there were some phenomena questioning the long-term sustainability of
this dynamic economic growth.
The resources of the policy of attracting and settling down new firms to serve
as a basis for maintaining supply oriented industry and services (such as cheap
trained labour, manufacturing costs advantages, financial support, tax redemp-
tions etc.) are gradually running out in the region. The majority of the existing
export oriented sectors is generally made up of assembling industries and hired
work needing imported input in a high ratio with less qualified labour and pro-
ducing low added value. In the early 2000s some sectors producing low added
value already suffered from negative investment which in the future may raise
serious employment problems in some micro regions. From the point of long-term
dynamic development the low interoperability of enterprises, the scarcity of
common projects and the extremely low intensity of interrelations between eco-
nomic, higher education and research sectors are raising another problem situa-
tion. R&D capacities in higher education, research and corporate sectors alike are
lagging far behind the region’s overall economic performance.
The gradually exhausting predominantly extensive development factors of the
region’s economic structure will increase the role and importance of SMEs with
high added value economies demanding knowledge-based and intensive intelli-
gence based industries. Besides restructuring and reorganisation economic and
regional development policies should be targeted at such key issues as intensive
factor based development and services to be delivered by new institutions and
organisations of fostering innovation and permanent reforms. Some industrial
sectors now seriously think in demand side ruled cluster oriented development.
3 Regional innovation policy and networking tools
Due to recognizing the above-listed trends not only direct and indirect services
assisting to entrepreneurial activities but also a growing number of advanced
business and innovation-oriented services with technological services emerged in
some industrial parks of West Transdanubia (Gyır, Szombathely, Sopron) since
the late 1990s.
West Transdanubia was among the first regions of Hungary where in 2000 on
the grounds of international experiences a regional innovation strategy was pre-
pared for improving the regional innovation system of West Transdanubia (RIS,
2001). The strategy was aimed at setting up a medium-term (10-year) priority
system to serve as a guideline for the preparation and efficient management of a
new regional innovation system and network. This strategy was based on three
major objectives: 1) Creating the missing institutions for the existing innovation
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system and improving the existing ones as well as integrating them into a net-
work; 2) increasing the innovativeness of businesses by organising programmes
and a competition system for fostering innovation; 3) providing an extra support
for activities generating knowledge-based and value added products as an output.
To achieve these targets four intertwined priorities were set up (Table 1).
The region can improve its productivity and regional competitiveness by re-
newing and increasing its innovation capacities which will definitely serve for
increasing the living standards of local inhabitants. The coordinator of the first
phase of the implementation of the innovation strategy was WPRDC with
WPRDA as its background organisation. As a result of implementing this strategy
and of giving a greater preference to decentralisation in the government’s central
innovation policy in the end of year 2004 WPRDA with four other regional actors
founded the Pannon Novum West Pannon Regional Innovation Agency (WPRIA)
and in the first half of 2005 with further co-founders the West Pannon Regional
Innovation Council was founded (WPRIC).
Table 1
The Priority Structure of the RIS for West Transdanubia
Priorities
Measures
1 The improvement of the region’s
1.1 Innovation award and premises marketing
innovation environment
1.2 Promotion of best practice
1.3 Interregional co-operation
2 The development of the knowledge 2.1 Support research and development, and innovation
base and stimulation
projects
of knowledge diffusion
2.2 Promotion and support of innovation oriented trainings
2.3 Innovation networks, clusters and development co-
operations
3 The development of innovation
3.1 Support the purchase of research and development
infrastructure
instruments
3.2 Innovation centres and research centre co-operation
network
3.3 Network development of innovation experts and
consultants
4 Financing innovation.
4.1 Foundation of the regional innovation funds
4.2 Tender preferences
Source: RIS for West Transdanubia, 2001.
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Although very limited resources were available for the funding of the Innova-
tion Agency until 2005, the year of accommodating the regionally decentralized
part of Innovation Fund3 into the system, several successful initiatives fitting
pretty well into the regional innovation strategy were launched during the past
few years. New innovation, technology and competence centres built up, new co-
operation research and university knowledge centres created, new regional cluster
organisations and a special economic initiative launched and the annual awarding
of regional innovation prizes founded are all just examples for that.
The approved in 2001 regional innovation strategy was followed by the re-
gion’s Technology Foresight Programme (TEP, 2004) in year 2004 which was the
first one in this category. This programme highlights some key sectors in the re-
gion’s economic structure having long-term and fundamental impacts on the re-
gion’s socio-economic development. They are as follows: 1) automotive industry,
electronic industry and their servicing sub-contractor background industries; 2)
tourism, especially thermal tourism and a wide scale of services associated with a
healthy style of life and health care; 3) environmental technologies, environ-
mental resources and their background industries; 4) knowledge industry – now
only in the phase of a new candidate sector which can completely be based upon
the region’s universities. The regional innovation strategy built on the results of
the Regional Foresight approved three vertical and three horizontal sectors as key
areas in further development projects. This means that automotive industry having
the deepest impact on the region’s economy will still enjoy priority in develop-
ment planning as well as wood and furniture industry as a sector of local impor-
tance. These sectors are accompanied by fostering information and communica-
tion technologies, environmental industries with special regard to renewable en-
ergy resources and a knowledge industry based higher education system.
In Hungary perhaps the West Transdanubian region is the most active and
maybe the most successful one regarding its past activities in the field of cluster-
oriented or cluster-based economic development. In the region’s key sectors differ-
ent cluster initiatives have been launched since 2000. These initiatives in the major-
ity of cases are fostering clusterization processes within a certain sector by per-
forming and providing tasks, services and functions having missed so far in the
region.
Their majority are fostering cooperation as well as information and knowl-
edge exchange between the business and non-profit sector (higher education,
research & development, special services and infrastructure). Clusters are capa-
3 The Hungarian Parliament by passing the 2003 XC Act has introduced a new financial instrument
under the name of ‘Research and Technology Innovation Fund’ for a better and more reliable
funding of R&D and of new knowledge as its product. It serves also for fostering social interests
relevant with them. Innovation Fund is a short name of ‘Research & Technology Innovation
Fund’.
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ble for identifying the major areas of development, for mobilising the relevant
enterprises, for formulating their own ideas and strategies and articulating them
towards political decision-makers and the relevant development actors and
agents. Cluster organisations are actively improving the region’s innovative mi-
lieu by fostering cooperation among cluster members and by facilitating the
spread of best practices (Grosz, 2006).
Between 2000 and 2005 five cluster initiatives were launched in the region but
two of them proved not to be real success stories. On the basis of sector analyses
and past experiences further clusters were founded at the end of year 2005. Today
eight clusters are operating in the region and some of them look back to 1-3 years
of experiences only. The founded regional clusters received significant financial
support from the region’s very strictly limited funds. In West Transdanubia all
clusters have been founded as a result of bottom-up initiatives. These eight clus-
ters are as follows:
− Pannon Automotive Cluster (PANAC), 2000
− Pannon Wood and Furniture Cluster (PANFA), 2001
− Pannon Thermal Cluster (PANTERM), 2001
− Pannon Logistic Cluster (PANLOG), 2005
− Pannon Textile Cluster (PANTEX), 2005
− Pannon Local Product Cluster, 2005
− Pannon Mechatronics Cluster (PANEL), 2006
− Pannon Renewable Energy Cluster, 2006
− Pannon IT Cluster (under organization)
In 2001 for creating an attractive and innovative economic environment, for
strengthening internal economic cohesion, for improving innovative skills and for
improving the quality and competitiveness of economic networks and clusters the
Pannon Business Initiative (PBI) was founded. PBI was launched as a kind of
network linking together the region’s other institutions and organisations con-
cerned in economic development, business promotion and regional development.
The management tasks of the initiative were undertaken by WPRDA (Pannon
Business Initiative, 2006).
In 2006 the five working cluster organisations founded the Pannon Business
Network (PBN) then the region’s all the 24 industrial parks joined this network.
PBN is responsible for taking part in the improvement of the professional skills of
the region’s labour force and in improving the competitiveness of regional busi-
ness organisations. The Network’s major objective is integrating all the firm
groups representing the region into a united corporate network which proves to be
successful and truly represents the region’s major economic sectors, the regional
distribution of firms and the scaling of companies as well. Industrial parks are
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capable for representing all the multinational firms that are present within the
region (Pannon Business Network, 2007).
In the West Transdanubian Region the relationship between clusters and inno-
vation can mostly be identified by examining the working cluster organisations’
role in creating the missing elements and in improving the interrelationship be-
tween the existing elements of clusters. Through their past activities, professional
and sectoral competences clusters have already contributed to the filling in the
missing elements of the regional innovation system and since the foundation of
WPRDA they are continuing this job as its strategic partners. Through their mem-
bers and their associated professional organisations, institutions, associations etc.
they get sufficient information on the special needs and demands their key indus-
trial sectors are concerned. They are capable for communicating and articulating
their special development issues towards development actors as well as for acti-
vating and mobilizing their business partners to achieve success in their pro-
grammes. Moreover these cluster organizations are definitely promoting the im-
provement of the region’s innovative milieu as one of their major tasks is im-
proving cooperation within the region by facilitating the diffusion of best prac-
tices among members. The participation of clusters on international fairs, events
and displays is another way of fostering the region’s common site marketing.
The new R&D infrastructures serving for the cooperation between the university
and business sector having been built during the past few years and concentrating
on networking process are also bound to clusterization. Therefore the automotive
industry oriented Automotive, Electronic and Logistic Cooperation Research Centre
(SZE KKK) founded by the leadership of Széchenyi István University as well as the
Regional University Knowledge Centre for Vehicle Industry (SZE JRET) are just
examples for that. SZE KKK and SZE JRET projects may both encourage in me-
dium-term the foundation of a scientific research centre of motor vehicle industry
which through its comparative research network may function as a centre for car
industry and motor vehicle manufacturing not only for Gyır and the North-Trans-
danubian region but also for Slovakia’s fast developing automotive sector. The
Regional University Knowledge Centre of Forest and Wood Utilization (NYME
ERFARET) founded by the University of West Hungary and the Environment Re-
source Management and Protection Cooperation Research Centre (NYME KKK) at
the same university (both of the centres located in Sopron) through their activities
are closely bound to wood and furniture industry.
To sum it up the foreign direct investments of the past 13 years introduced
new technologies and new methods of management for the region. They increased
the professional knowledge of local labour force which expanded the region’s
innovative capacities. Thus, the region – unlike Hungary’s other territories be-
came capable for adopting new organizational models, techniques and develop-
ment instruments at a greater speed and efficiency. Industrial parks, innovation
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centres and incubator houses were built for fostering development and for facili-
tating innovation, the foundation of new firms and the activities of SMEs, new
networks and cluster organizations were established for fostering and intensifying
cooperation. Nevertheless, there is a great shortage in the know of networking and
management which could just provide a great help towards the successful imple-
mentation of these strategies.
4 The region’s R&D and innovation potentials
The capability of a regional economy for a constant renewal or in other words a
region’s innovativeness is one of the key factors of its durable competitiveness.
Although the meaning of the term innovation is by far wider than of R&D as it
can be affected by several other factors, yet the R&D activities preceding innova-
tion are still play an important role in it. In the following part of our paper we are
going to present the changes having undergone in the major indicators of the West
Transdanubian Region’s R&D activities with special regard of the following
items: the number of the region’s R&D sites, the number of employees on R&D
sites, the number of R&D themes investigated by R&D sites and the amount of
R&D spending.
If we take only the secondary data of R&D into account (sums of R&D
spending, the number of employees in the R&D sector, the number of research
units, research themes and tasks, the number of employees with scientific degree)
we must notice that the West Transdanubian Region’s weight regarding R&D
potentials is by far lagging behind the region’s economic weight or even behind
its population share of the total national population. Nevertheless, since the mid–
1990s several positive processes have been going on in the region and in almost
all segments of socio-economic development West Transdanubia shows the most
remarkable progress of development.
As regards the performance of the R&D sector – mostly because of the ex-
tremely low base values and of some other factors making the situation more
complicated (the structure of the economy, the scarcity of business-oriented ac-
tivities or the absence of researcher universities) the majority of indicators are still
below the average of the Hungarian provincial regions (we excluded Budapest
from the calculation of average). Due to its high spatial concentration of scientific
sector Central Hungary’s share from total R&D indicators is over 50%.
Although the number of research units has doubled in the region during the
past 10 year period the region’s percentage from the national average of R&D
indicators – excluding a few greater extreme values in some years – has remained
the same in fact. It was 7.5% both in year 1996 and 2006. As regards the number
of research units a very balanced growth can be observed during the past 10 years.
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Almost in all regions the number of research units increased by the same percent-
age (75-95%) which has stabilized the former spatial differences. It was only
Central Transdanubia that produced a significantly higher growth (190%) but
even this was sufficient for taking the last but one position among the Hungarian
regions. Regarding the absolute figures West Transdanubia could precede North-
Hungary and Central Transdanubia only, while comparing the same values to the
number of inhabitants the situation slightly improved as the West-Hungarian val-
ues of the R&D sector have preceded the values of North Great Plain.
By examining the number of research themes and research tasks we get a better
impression on the ongoing processes as the 190 themes per 1,000 inhabitants value
in 2006 is the second best after the Central Hungary. Regarding the history of the
past 10 years it seems obvious that while these values increased by 55 per cent on
national level, this region produced a 137 per cent growth regarding the number of
R&D themes and tasks which is the highest increase rate all over Hungary.
Although the spatial differences of R&D within the region have decreased dur-
ing the past few years but they are still high even now. Gyır-Moson-Sopron
County’s share from the spatial distribution of research units decreased to 60% and
regarding research themes and research tasks this share dropped to 61% in 2006
from 75% in 1996. The spatial concentration of R&D within the region is still too
high anyway. The most important hosting organizations of research units are still
the local institutes of higher education especially the two university centres of
Gyır-Moson-Sopron County (University of West Hungary and Széchenyi István
University) which with their strengthening KKKs and RETs are further increasing
their importance on the expense of others. Academic research institutes especially
in the field of technical sciences have marginal role here only and the number of
industrial research units is also low even though the number of multinational firms
and local SMEs recognizing the high importance of R&D is increasing now.
During the past 10 years the West Transdanubian Region was capable for in-
creasing the number of its R&D employees in the highest rate. This increase rate
was triple of the national average. Its 3.5% percentage from the total national
value in 1996 increasing to 5.2% by year 2006 is strongly correlating with this
fact but it is still heavily lagging behind both by its population based regional
weight and by its earlier R&D indicators not to mention the region’s own eco-
nomic potentials. Despite this growth even the figure of 2,625 employees working
in the R&D sector could grant only the 6th position by preceding the North Hun-
gary only among the Hungarian regions and regarding the number of inhabitants
West Transdanubia preceded only one more, the Central Transdanubian Region.
The situation is just the same when we compare not the absolute figure of R&D
employees but only the number of researchers and development experts (Table 2).
By looking at the data in a 10 year perspective we can notice that Central Trans-
danubia starting from a very low position was able to supersede the region’s aver-
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Discussion Papers, No. 67.
age growth rate. Although West Transdanubia’s share from the total national
value increased from 4% in 1996 to 5.5% by 2006 of which more than 0.5% is the
result of the past two years the region – just as in case of regional R&D employ-
ment data is still taking the 6th (or by the number of inhabitants the 5th) position
among Hungarian regions. The spatial breakdown of employees working in the
R&D sector within the region is obviously correlating with the pattern of the spa-
tial concentration of research units and research themes. Gyır-Sopron-Moson
County’s values are the highest regarding all the two indicators.
Table 2
Development of the Number of Researchers and Developers
Share from national, %
Number of researchers and
developers per 100 thousand
inhabitants
1996
2000
2004
2006
1996
2000
2004
2006
Gyır-Moson-Sopron County
2.9
4.0
3.3
3.7
141.5
259.3
230.6
275.4
Vas County
0.9
0.9
1.1
1.3
65.8
97.0
125.4
157.7
Zala County
0.2
0.1
0.5
0.5
16.7
10.0
50.9
55.1
West Transdanubia
4.0
5.1
4.9
5.5
83.4
141.2
149.5
179.5
Central Hungary
59.4
60.6
57.6
57.9
429.8
596.9
619.7
664.9
Central Transdanubia
3.5
5.2
5.6
5.6
65.7
128.2
153.8
166.9
South Transdanubia
6.8
6.6
7.9
7.5
143.1
184.8
244.5
254.7
North Hungary
5.6
4.6
5.2
4.9
89.9
98.3
122.7
127.9
North Great Plain
10.6
8.9
9.4
9.1
143.8
158.7
185.7
193.6
South Great Plain
10.2
9.0
9.3
9.5
155.8
182.3
207.6
230.2
Hungary
100.0
100.0
100.0
100.0
205.0
273.3
300.7
325.4
Source: Own elaboration based data from Hungarian Central Statistical Office.
Comparing the number of researchers and development experts to the total
number of employees working in the R&D sector we can observe that their 68.4%
ratio in West Transdanubia is the highest of all preceding the values of all the
other Hungarian regions even Central Transdanubia the number one in all region.
The picture is even more interesting if we compare the employees working in
R&D sector per research unit values. In the West Transdanubian Region the num-
ber of research units and of employees working in the R&D sector increased by
the same rate, therefore no significant changes have occurred, the average 12–13
persons per research unit has been maintained. However in other regions this
value decreased significantly leading us to the conclusion that the increase of re-
search units was much higher than of R&D employees. The earlier values of 20–25
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Discussion Papers, No. 67.
persons per research unit dropped to 14–18 everywhere, while in the Central Hun-
gary the earlier 30.5 person per research unit value dropped to 21.1 by year 2006
which is a sign of fragmented R&D capacities. The changes in the per research unit
number of researchers and development experts are clearly reflecting this process.
Although the region’s 8.5 value is the lowest in Hungary a spatial equalisation ten-
dency can be observed in the period of the last 10 years as West Transdanubia was
the only region where this 8.5 value was a result of an increase from the earlier
value of 7.6 in all the other regions a declining tendency can be seen. There the 11–
12 persons per research unit values in 1996 dropped to 9–10 by 2006.
The number of researchers with scientific degree also dynamically increased
during the past 10 years as the number of scientists with CSc and PhD degree
nearly reached 550. This is quadruple of the value in 1996. The number of re-
searchers with MSc degree is also fairly high as it has doubled during the past 10
years and by 2006 the region’s R&D activities were strengthened by 80 ‘aca-
demic doctors’. The intensity of growth was the highest in both fields here in the
West Transdanubian Region but nevertheless the region’s share – 5.2% (CSc and
PhD) and 4.2% (DSc) – from the total figure is still low, even lower than the
share of employment in R&D sector. With these values the West Transdanubian
Region takes the 6th position among Hungarian regions. The analysis of the per-
centage of researchers with scientific or academic doctor degree in the total umber
of inhabitants will give a better result as in this case West Transdanubia is taking
the 5th position by preceding Central Transdanubia and North Hungary but still
cannot compete with regions having long-time traditions in higher education and
big university campuses. The presence of universities greatly influencing the
number researchers with scientific degree is well reflected by the region’s internal
heterogeneity as well. The values of Gyır-Moson-Sopron County are more than
double of Vas County and 4–5 times higher of Zala County having the weakest
institutional system of higher education within the region. Moreover intraregional
differences further increased during the past few years.
The competitiveness and fundraising abilities of the higher educational and re-
search centres of Budapest, East Hungary and South-Transdanubia (primarily
Debrecen, Szeged and Pécs) are much better now than of the West Transdanubian
Region. Regarding these indicators the share of Budapest and Pest County is even
higher reaching nearly the value of 70%. Furthermore, after a 4–5 year period of
decline the weight and importance of the agglomeration zone of Budapest is now
increasing again. In case of R&D expenditures excluding R&D investments the
situation is slightly better but the concentration of R&D investments here is ex-
ceeding the ratio of 76%. On the grounds of this it is not surprising that the share
of some provincial regions from R&D investments is extremely low which prob-
lem is much more serious in West Transdanubia region suffering from the scar-
city of R&D capacities.
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Regarding R&D indicators West Transdanubia usually takes the 5-6th position
among Hungarian regions and a significant improvement of this position is
unlikely in the near future though due to some national programmes the region’s
higher educational system is undergoing profound changes just to mention KKK
and RET developments as examples. In the West Transdanubian Region the total
amount of R&D funds exceeded the sum of 9.3 billion HUF of which 12.5% a
lower rate than the national average was allocated for R&D investments and 8.5
billion HUF was spent for financing the running costs of R&D activities (Table
3). In the past 10 years it was the activation of the corporate sector that increased
the ratio of R&D investments to 19–20% in West Transdanubia and Central
Transdanubia. The per capita values of R&D expenditures are neither better. In
the region the spatial concentration of R&D expenditures is even higher than of
other R&D indicators (the per capita value of R&D expenditures in Gyır-Sopron-
Moson County is double of the other two counties’ indicators. The new infra-
structures attached to universities (KKKs and RETs) will probably further in-
crease the present differences.
Table 3
Development of Expenditures of Research and Development Places
Share from national, %
Expenditures of R&D places
per researchers, 1000 HUF
1996
2000
2004
2006
1996
2000
2004
2006
Gyır-Moson-Sopron County
2.6
2.4
3.7
3.1
7.24
8.92
25.40
23.60
Vas County
0.3
0.3
0.4
0.7
2.4
5.36
8.20
14.68
Zala County
0.1
0.1
0.6
0.3
1.84
11.20
29.12
18.00
West Transdanubia
2.9
2.8
4.8
4.0
5.88
8.32
21.92
21.00
Central Hungary
68.9
70.3
67.5
69.9
9.48
17.32
26.60
34.36
Central Transdanubia
5.7
5.0
6.3
4.9
13.2
14.56
25.28
24.52
South Transdanubia
3.1
3.8
3.3
3.0
3.68
8.48
9.60
11.20
North Hungary
3.0
2.4
2.7
3.2
4.36
7.80
12.04
18.24
North Great Plain
7.2
7.8
8.5
7.8
5.56
13.12
20.56
24.40
South Great Plain
9.3
7.9
6.9
7.3
7.48
13.04
16.84
21.84
Hungary
100.0
100.0
100.0
100.0
8.16
14.96
25.40
28.44
Source: Own elaboration based data from Hungarian Central Statistical Office.
To sum it up, it can be stated that the West Transdanubia’s share and R&D
potentials are lagging behind the share of the region’s economic performance or
even behind the region’s population share from Hungary’s total figures. Although
since the mid–1990s very positive processes are undergoing in the region and
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West Transdanubia showed the most dynamic progress in almost all segments
during the past ten years its R&D performance indicators are still lagging behind
the average of the Hungarian regions (excluding Budapest). The competitiveness
and fundraising capabilities of the strong higher educational and research centres
of Budapest, East Hungary or even South Transdanubia today is still stronger than
of West Transdanubia. West Transdanubia regarding R&D indicators in most
cases takes the 5–6th position among Hungarian regions and a significant im-
provement in this position is unlikely in the near future.
It is well-known that the Lisbon Objectives have set up increasing significantly
the sum of R&D expenditures by year 2010 to reach at least 3% of the national
GDP as a key objective for maintaining the competitiveness of the European
economy on the global arena. During the past few years this indicator was just a
little bit over 1% in Hungary and 0.3% in West Transdanubia. All these figures
are verifying the need for a more intensive development both on national level
and principally in our own region for closing up to the economically advanced re-
gions. The most recent data of EIS (European Innovation Scoreboard 2006) show
that West Transdanubia is now in a less handicapped situation in comparison to
Hungary’s other regions as its 0.25 per cent value is significantly exceeded by Cen-
tral Hungary and Central Transdanubia only. But comparisons with the EU aver-
ages (EU25: 0.45, EU15: 0.5) or even the nearby regions (Slovenia: 0.52, Styria:
0.58, Bratislava: 0.66) show a very high rate of backwardness. West Transdanubia
is taking only the 176th position on the ranking list of 203 regions in this respect
which frankly speaking is not the very result we should be too much proud of.
The region’s incompetence in fundraising is well illustrated by the fact that in
2005 it could win only 7% of the government’s development funds while its share
from Hungary’s total population is 9.8% (VÁTI–ÖTM, 2007). This is even more
true in case of economic development grants as from all of the state funds desig-
nated for economic development objectives only 3% was allocated for the region
and the per capita value of economic development funding is less than one-third
of the national average. Even the funding of the area is spatially very diverse. In
West Transdanubia the vast majority – almost 67% – of the state grants desig-
nated for economic development (1.5 billion HUF) is allocated for innovation and
research which is due to the heavy funding of regional university knowledge cen-
tres. In national context – due to the low number of nationally registered research
units – the situation seems to be less advantageous as the region received only 5%
of the total grants allocated for research. Thus the per capita ratio of state grants
allocated for research is only half of the national average (VÁTI–ÖTM, 2007).
The majority of state grants in the region were concentrated into the micro regions
of university cities (Gyır, Sopron, Mosonmagyaróvár, Keszthely and Szom-
bathely) and the region’s other micro regions won only a minimum of state grants
designated for agricultural, innovation or research.
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The problems of the region’s R&D potentials may threaten the area’s economic
sustainability even in medium-term therefore eliminating their dichotomy should be
a first-rate priority. Fostering innovativeness by creating and supporting spatially
organized economic and principally development-oriented networks would be very
important parts of this task. In the further chapters of our paper we are going to
provide an overview on the past activities, attitudes and future plans of the region’s
economic actors and other members of the innovation system i.e. those segments
that can well explain the successes and failures achieved so far and will at the same
time be the primary targets of future developments and supports.
5 The innovation activities of enterprises
In the spring of year 2007 we conducted a survey on the innovation activity of
West Transdanubian enterprises through interviews. Our present analysis is dem-
onstrating the results of a three-year period between 2004 and 2006. Our ques-
tionnaire can be divided into three main sections. The first section is collecting
general information on the region’s business enterprises: their site, activity scope,
size, annual revenues and spatial relations. The second section is assessing the
special features of the business firms’ innovation activities with special emphasis
on the possible four types of innovation such as product, process, organisa-
tional/corporate scheme and marketing innovation. In the final section of survey
the implementation conditions of innovation, the future development plans and
the area’s innovative potentials are presented.
In the sampling period we did not intend to provide a comprehensive survey
on the enterprises’ and region’s general situation of innovation by investigating
all the business enterprises. Instead we rather selected a group of firms being pre-
sumably rather more concerned and more active in innovation activities. There-
fore our survey data are not relevant for all enterprises of the region as we rather
focused on agricultural and industrial enterprises and some servicing segments
directly attached to R&D were also involved into our survey. There were two
outstanding factors that were taken into account during the sampling process. One
is – as it has just been mentioned – the limited scale of enterprises was selected
according to their main business profile. The other is that micro- and private en-
terprises employing less than 5 people were excluded from our survey. The pur-
pose of the set-up criteria was the maximization of the elements of relevant re-
sponses so our conclusions drawn from the representative sample of 401 enter-
prises can be generalized only with taking the above-mentioned sampling criteria
into consideration.
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Between 2004 and 2006 the enterprises investigated spent 3.44% of their reve-
nues on R&D on the average but 70% of the enterprises did spend nothing on
R&D at all. 41.4% of the firms surveyed have a kind of quality assurance system.
The general specifications of the sample are shown by Table 4 while research-
development specific data are provided by Table 5.
Table 4
Detailed Data of Companies in Sample, 2004–2006
Representative sample with
401 companies
number of com-
number of
panies
companies
Location of headquarter, by counties
Gyır-Moson-Sopron
186
46.4
Vas
96
23.9
Zala
119
29.7
Location of headquarter, by type of settlement
Town with county rank
215
53.9
Other town
91
22.8
Village
93
23.3
Main activity of companies (by NACE code):
Agriculture, hunting, forestry
59
14.7
Mining and quarrying
6
1.5
Manufacturing
294
73.3
Electricity, gas and water supply
4
1.0
Computer and related activities
12
3.0
Research and development
2
0.5
Architectural and engineering activities and related
13
3.2
technical consultancy and technical testing and analysis
Others
11
2.7
Employment (2006)
Average
58.34
Median
18
Maximum
1420
5–10 staff
151
37.8
10–50 staff
166
41.5
51–250 staff
65
16.3
251 or more staff
18
4.5
Total turnover, 1000 EUR (2006)
Average
3.96
Median
0.688
Maximum
460
Part of a company group? Yes
62
15.5
Source: Own elaboration based on enterprise survey, 2007.
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Table 5
Main R&D Data of Companies in Sample, 2004–2006
Representative sample with
401 companies
number of
%
companies
Share of R&D expenditures in total turnover
Average
3.4
R&D expenditure by share of turnover
0%
282
70.3
1–5%
62
15.5
6–10%
19
4.7
11+%
38
9.5
Average yearly R&D expenditure, 1000 EUR
Average
348
Median
0
Maximum
92,000
Average R&D expenditure per employee, 1000 EUR
Average
2.76
Median
0
Maximum
100
Share of employee with higher education
Average
14.5
Median
10.0
Maximum
100.0
Share of R&D employment (average in 2004–2006 years)
Average
3.3
Median
0.0
Maximum
100.0
Source: Own elaboration based on enterprise survey, 2007.
Regarding the acquisition and sales activities of enterprises the county enjoys a
preference against other geographic locations with a dominance of 44.4% in the
area of acquisitions and 52.1% in the area of sales. The low values indicate weak
regional cohesion, weak intraregional economic relations and a spatial mismatch
of planning-statistical regions with real economic processes.
50.1% of West Transdanubian enterprises implemented one of the four main
types of innovation4 which means that half of the region’s enterprises can be re-
4 During the survey in accordance with CIS4 Survey we investigated the four types of innovation
(product innovation, process innovation, marketing innovation and organizational/corporate
structure innovation) as defined by the Oslo Manual (Oslo Manual 2005). We defined an enterprise
as innovative in case of giving or marking at least one of the four types on the questionnaire within
the time period of the past three years of its activity.
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garded as innovative. During the survey period 22.2% of the region’s enterprises
implemented product, 24.9% process, 20.1% organisational/corporate scheme and
32.4% marketing innovation (Figure 2).
Figure 2
Frequency of Different Type of Innovation, % of Enterprises
Innovative enterprises
Product innovation
- introduction of new goods
- introduction of new services
Process innovation
- new manufacturing or producing
methods
- new logistics, delivery or distr. methods
- new supporting activities for porcesses
Organisation innovation
- new management methods, procedures
- new organis. structures, decision making
- new ways of external relationships
Marketing innovation
- new product planning methods
- new packaing methods
- new market introduction methods
- new advertising methods
- new price making methods
0
10
20
30
40
50
Source: Own elaboration based on enterprise survey, 2007.
The majority of firms implementing product innovation introduced new prod-
ucts (88%) and only one-third reported on introducing a new service. Innovations
had the greatest impact on the expansion of product range or service palette but
companies regard quality improvement as a factor of same importance. In case of
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process innovation the improvement of manufacturing methods was the most
important target of innovation (78%) and its greatest impact was manifested by a
greater flexibility of manufacturing or services. 84 enterprises reported on a cor-
porate scheme innovation. At most companies (71%) the new methods and proce-
dures applied were manifested in the methods of maintaining external relations
and this type of innovation had the greatest impact on increasing the efficiency of
maintaining external relations. The majority of enterprises reporting on marketing
innovation tried to improve their product advertisement methods (62%) and these
innovations had about the same impact on increasing the company’s market share
and on getting better information on their consumers’ demands.
On a 1–10 scale innovative firms ranked their own innovation activities for 6.7
on the average while on a 1–100 scale where score 100 marked the competitor’s
innovation level they ranked themselves by score 89.56 on the average so they
ranked their innovativeness below their competitors’ score. The toughest limita-
tion forces of innovation activities or of the implementation of projects are finan-
cial expense factors, namely the high expenses of innovation while the softest
limitation force is the absence of relevant technical information (Figure 3).
As regards future development plans it can be stated that the development of
applied technology is the most preferred factor as 70.6% of the innovative enter-
prises are going to apply this method of innovation in the next years. The training
of staff and professional retraining have similar importance (66.2%) as well as of
product development (68.7%). 55.4% of the business enterprises of the represen-
tative sample consider IT, 47.1% services and 32.9% marketing and sales as the
key areas of innovation while the management and corporate scheme develop-
ment seem to be the least preferred innovation areas for the business firms par-
ticipating in our survey. Assessing the region’s innovative potentials the partici-
pants of our survey consider good subcontractors, suppliers and adequately
trained labour force as the two strongest sides of our region. We can see that these
factors are relatively highly appreciated in the region but the greatest difficulties
are directly arising from factors stemming from the funding of innovation such as
the financial support of innovation and economy in general, the amount of work-
ing capital or the availability of risk capital (Figure 4).
Of innovation support services product qualification, product sampling and
market research are the most frequently used (33–42%) and these services seem
to be the most popular in the future as well. By popularity these services are fol-
lowed by technology related services such as technology development, technol-
ogy shows, technology assessments, tools for measuring and testing the use of
special machinery and so on (12–16%).
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Figure 3
Factors Hampering for Innovation Activities, % of Enterprises
Innovation costs too high
Lack of funds within your enterprise or group
Market dominated by established enterprises
Uncertain demand for innovative products
Lack of financial sources outside your firm
Lack of qualified personnel
No need due to prior innovations
No need due to no demand for innovations
Difficult to find cooperation partners
Lack of information on markets
Lack of information on technology
high
medium
0
10
20
30
40
* The percentage of enterprises evaluated the factor’s hindering extent high or medium level.
Source: Own elaboration based on enterprise survey, 2007.
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Figure 4
Most Problematic Factors Regarding to the Implementation
of Innovations in West Transdanubia, % of Enterprises
Innovation and business supports
Sound demand on innovation
Capital (general financial instruments)
Risk capital
Cooperation willingness
General business environment, climate
Research capacity and supply
Consulting services
Required skilled labour
Required suppliers, subcontractors
0
10
20
30
40
50
60
* The percentage of enterprises evaluated the factor low level in the regions.
Source: Own elaboration based on enterprise survey, 2007.
6 The differentiation of innovation activities by firm groups
It is worth comparing the probability of the occurrence of innovations on the basis
of the enterprise’s profile. In our case profile is a compound multivariable system
of features. The analysis part of our investigation comprising the most important
results of our survey has revealed the connections between the business enter-
prise’s revenues, staff, share of foreign ownership, the orientation of research-
development and the probability and intensity of innovation. The region’s firms
on the basis of an eight component corporate parameter system and using cluster
analysis method were sorted into different groups and were typified. Then within
each company group the probability of each innovation activity was calculated.
Our first question was that how many and what kind of firm groups can be dif-
ferentiated in the sample by the general indicators of economy and R&D. If an
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appropriate criteria system for grouping has been set up we would like to see how
the different firm types differ from each other by their innovation activities.
Of the possible classification procedures we chose the so-called two-step
clustering method. We did so because on the one hand during the procedure the
model offers alternative cluster for further analysis (so we do not have to define
the number of firms in advance) on the other hand it uses checking statistics to
assess the role of cluster variables in defining each group. The content of the
sample did not change in this case either. We proceeded with the original 401
firms. Finally 372 firms were surveyed after filtering out the missing data.
The final result of cluster analysis is influenced by several factors. One is the
set of variables serving as a basis for grouping. We used eight general organiza-
tional parameter indicators: besides the well-functioning original data sets (year
of foundation, the share of foreign proprietorship, the amount of net revenues,
the number of staff) indicators measuring R&D orientation were also used in the
survey (the amount of R&D expenditures, the number of employees working in
the R&D sector, the share of employees with university or college degree, self
evaluation of innovation). We deliberately chose such indicators that are in
close relationship with innovation because we are on the opinion that today
these types of knowledge-oriented indicators are generally regarded as those
describing the general situation of entrepreneurs. In the final phase of the two-
step clustering method having taken all the eight parameters of firms into con-
sideration four clusters were differentiated (Figure 5). The sizes of the groups
are greatly differing from each other.
On the basis of the enterprises’ R&D indicators the group of relatively active
big firms can clearly be identified (4%) as well as the group of knowledge in-
tensive SMEs mostly owned by Hungarians (13%), the group of foreign owned
SMEs with moderate development inclinations (16%) and the group of Hun-
garian owned SMEs doing only minimal development activities and being in a
handicapped position regarding innovation activities (68%) which is more than
two-thirds of the surveyed business enterprises.
One of our conclusions is that the group structure of firms is strongly differen-
tiated. About 70% of the region’s firms are domestic, small-scale business enter-
prises with low revenues, minimal expenditures and R&D human resources. They
even evaluate their own innovation activities very low. To cut it short, their inno-
vation is at minimal level. On the level of SMEs the absence of R&D activities is
surely not such a big problem as in case of bigger firms as they are more flexible
and very often they rather concentrate on the adaptation of new technologies in-
stead of technical modernization.
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Figure 5
The Groups of Companies by Innovativeness and Main Characteristics
of the Individual Groups (cluster centres)
68%
(N=252)
16%
(N=58)
13%
4% (N=15)
(N=47)
Hungarian SMEs –
Foreign SMEs –
Large companies
Strongly R&D
minimal development
moderate development
oriented SMEs
willingness
willingness
Foundation: 1994
Foundation: 1995
Foundation: 1984
Foundation: 1995
Foreign own: 0.2%
Foreign own: 93%
Foreign own: 25%
Foreign own: 9%
Turnover: EUR 0.5 Mio
Turnover: EUR 1.4 Mio
Turnover: EUR 30 Mio
Turnover: EUR 0.8 Mio
Employment: 15
Employment: 25
Employment: 600
Employment: 11
With higher educ.: 9%
With higher educ.: 15%
With higher educ.: 12%
With higher educ.: 45%
R&D employment: 0.7%
R&D employment: 1%
R&D employment: 2,5%
R&D employment: 20%
R&D expenditure: 1.05%
R&D expenditure: 1.2%
R&D expenditure: 4.4%
R&D expenditure: 20%
Innovation level comparing Innovation level comparing Innovation level comparing Innovation level comparing
to competitor: 71
to competitor: 107
to competitor: 72
to competitor: 135
Mainly small enterprises
Mainly small enterprises
(more than 70%)
(more than 80%)
* The self ranked innovation level is 100, if the firm evaluates his innovation capability the same as
his most important competitor. If it is better than the competitor the firms had to score higher, if it
is worst it had to score below 100. In case of percentage and score values data are the averages, in
other cases they are the medians to filter the distortion effect of extreme values.
Source: Own elaboration based on enterprise survey, 2007.
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Another third part of the companies is divided into three distinctly separable
groups. In this set firm parameters are better and we should pay a special atten-
tion for those 47 knowledge and development oriented small enterprises that are
interested in the fields of engineering, computer technology, mechanical engi-
neering, technical development and electronics. High care should be paid for
another 10% part of small mostly foreign owned enterprises. Our survey indi-
cates that besides the traditional multinational firm oriented economic trend an
increasing attention should be paid for foreign owned small enterprises in the
north-western border zone of Hungary as their presence is significant among the
region’s economic actors. It can be stated – even without listing the concrete
innovation activities of firms – that there is a wide gap between the performance
of the region’s companies and this demarcation line is separating a small group of
competitive firms from the majority of weakly competitive firms.
The four innovation types comprise all the 13 innovation activities (Table 6).
Actually, only the members of the first two company clusters are more active in
innovation. In fact marketing innovation is the only exception of this rule. In this
field the difference between firm clusters is smaller. There are very extreme dif-
ferences among companies in the field of process and corporate scheme innova-
tion although the size and complexity of firms cannot be disregarded. The inno-
vation activity of the 252 mostly Hungarian owned SMEs is almost minimal es-
pecially if we consider how comprehensive and permissive our definition was on
the meaning of the term: ‘innovation’ (the word may refer to further improved or
newly introduced products, processes or methods at a firm as well).
Based on the results we can conclude that on the grounds of the past years’ experi-
ences only big firms or knowledge and development oriented small enterprises can be
regarded as innovators or adaptors. The problem is that their ratio of the total is 17%
only and this result was born in such an innovation definition context which interprets
innovation not only as finding out a new product and introducing it into the market
but also as transferring or adapting products and methods new for the firm itself but
already existing on the market and might be existing for a long time.
As our survey data indicate there are two ways for innovation policy. One is
tuning up a small group of innovative firms (10–15%) that can successfully live
and work in the present environment and the other is closing up the majority or at
least a part of non-innovative Hungarian SMEs and making them realize the
importance of innovation by stimulating their activities of this sort.
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Table 6
Frequency of Innovation by Company Groups, %
Innovation type
Large
R&D
Foreign Hungarian Average
companies oriented
SMEs
SMEs
of all
SMEs
firms
N=15
N=47
N=58
N=252
N=401
Product innovation
introduction of new goods
20
40
21
15
20
introduction of new services
13
19
10
4
7
Process innovation
new manufacturing or producing
67
45
21
11
19
methods
new logistics, delivery or distribution
40
23
5
5
8
methods
new supporting activities for processes
47
32
7
8
13
Organisation innovation
new management methods, procedures
33
21
5
8
10
new organisational structures, decision
33
17
2
2
5
making
new ways of external relationships
27
47
14
9
15
Marketing innovation
new product planning methods
20
38
9
10
15
new packaging methods
27
19
12
12
13
new market introduction methods
27
28
15
14
16
new advertising methods
33
38
22
15
20
new price making methods
13
28
12
6
10
* Table contains only the Chy-square probe significant results. There is significant difference among
the four clusters (sig. = 0.001).
Source: Own elaboration based on enterprise survey, 2007.
7 Co-operation in innovation and paths of information flow
Manufacturing new products (or introducing new services) may often be very
expensive activities. In the hierarchy of the inhibiting factors of innovation high
expenses, the absence or insufficiency of funding resources or the functional in-
adequacy of external financial environment have leading role. Cooperation in
innovation may be a solution for these problems as good contacts among enter-
prises and common development concepts may save time and money for stake-
holders. This is the reason why in our time it is a key issue whether innovation
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cooperation initiatives, their basic models or even networks have already been
established or not. In this phase of our analysis we are trying to find an answer for
the question how much part of the region’s enterprises is involved in this issue,
what are the most typical forms of cooperation and what types of cooperation
partners have been proved valuable and useful from the point of the enterprise’s
innovation activities. The data are gathered from the first series of our question-
naire survey of innovation carried out in year 2005.
Our starting question was that whether there had been any cooperation be-
tween the enterprise and other firms in the field of innovation within a three year
period between 2002 and 2004. Can every active role playing in innovation not
necessarily yielding commercial benefits for both partners be regarded as coop-
eration when even tasks are not to be subcontracted? By setting up these criteria
38% of the region’s innovative enterprises can be regarded as cooperative. As a
rule this means that every third enterprise has implemented its innovation pro-
gramme by participating in a programme of another organisation or institution
through a kind of joint project or sub-project. Of course these contacts were of
different kind and their intensity was also different so this figure does not tell too
much about the strategies and situations of the actual cooperations themselves.
For a detailed analysis we should see who the partners are (Figure 6). On the
basis of the occurrence probability data three major actor patterns can be differ-
entiated in the region’s innovation cooperation schemes. The first and the second
types comprise economic actors playing key role in the productive and servicing
capacities of enterprises. In case of 53% of enterprises subcontractors and of 49%
customers/clients were concerned as active participants in the implementation of
new products or services. It is not surprising from the point of the operation
mechanism of sectors as maintaining a kind of contact is indispensable from the
point of input and output. The next type of partnership – the third in the row of
the frequency of occurrence – implies the competitors of enterprises or other
firms operating within the same economic sector (43%). Between the elements of
the firm group the number of innovation cooperations may also be very high es-
pecially if we consider that of the 161 selected enterprises only 40 are members of a
firm group (25%) and of them every second reported on having an internal coop-
eration partner. The active presence of the expert, consulting, university and re-
search sectors in this circle is by far less reaching only the share of 15–20% on the
average.
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Figure 6
The Probability of Co-operation with..., % of Enterprises
Suppliers
Clients or customers
Competitors
Part of a company group
Experts, private R&D institutions
Universities, collages
Innova tion and technology centres
Public research institutions
0
10
20
30
40
50
60
Source: Own elaboration based on enterprise survey, 2005.
Of eight possible partners the interviewees had to mark in the questionnaire
those that proved the most valuable/useful during the implementation of their
development projects (Figure 7) so we have the answer for the question if there
exists a ranking of importance, a kind of utility value regarding their cooperation
in innovation. The naming of the three most important partner types did not sig-
nificantly changed the earlier presented system nevertheless it marks the border
between the groups more clearly. In the contact system of the region’s enterprises
subcontractors, clients/customers, other enterprises of the same economic sector
and potential competitors are the most dominant elements. The only difference
from this pattern and structural change can be observed in the third group of re-
sponses, here we can face a phenomenon where there is a 15–20% of firms for
which institutes of higher education, expert and private R&D firms prove to be
useful and are valuable ‘target objects’ for active cooperation in innovation.
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Figure 7
Most Important Cooperation Partners, % of Enterprises
Suppliers
Part of a company group
Clients or customers
Competitors
Experts, private R&D institutions
Universities, collages
Innova tion and technology centres
0
5
10
15
20
25
30
35
40
Source: Own elaboration based on enterprise survey, 2005.
The region’s information system consists of several components. These with
more or less success can contribute to the renewal of the region’s enterprises as
they provide useful and interesting for creating new ideas, for bringing new
inputs into processes, for solving problems and for reducing costs. Of course it
is also useful if we are aware of the role of resources, communication fields and
platforms on regional level but perhaps it may be more useful to measure the
impact, role and efficiency of these forums and channels. By this we mean such
resources which provided information to new innovation projects or contributed
to the completion of the existing ones. If we were able to set up a ranking of
importance for regional channels and sources of information (Table 7) we could
not only better understand the background mechanisms of innovation but also
see those points of reference which could be set up as targets for an innovation
support and development policy. Responses attaching high importance to a re-
source have high impacts on the ‘formulation of the ranking system’ and on
selecting dominant resources.
Personal contacts have outstanding importance in innovation projects. 57% of
the enterprises appreciated the role of formal and informal contacts as of high
importance and another 25% as of average importance. Beyond them three addi-
tional resources can be defined as key communicational platforms. They are:
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knowledge acquired through contacts within the enterprise’s own organisational
system, the knowledge gained through the enterprise’s partnership system: clients,
customers and subcontractors.
Table 7
Rank of Information Sources Connecting to Innovation
Information sources
Importance
high
medium
low
no source
%
%
%
%
Personal contacts and relationships
92
57.1
40
24.8
6
3.7
23
14.3
Inside information
71
44,1
50
31,1
6
3,7
34
21,1
Clients and customers
68
42.2
48
29.8
19
11.8
26
16.1
Suppliers
55
34,2
60
37,3
16
9,9
30
18,6
Conferences, trade fairs, exhibitions
44
27,3
51
31,7
16
9,9
50
31,1
Competitors, other enterprises
41
25,5
45
28,0
34
21,1
41
25,5
Scientific periodicals, professional and
39
24,2
55
34,2
25
15,5
42
26,1
technical publications
Professional and sectoral associations
24
14,9
39
24,2
33
20,5
65
40,4
Experts, private R&D institutions
22
13,7
27
16,8
21
13,0
91
56,5
Universities, collages
12
7,5
14
8,7
19
11,8
116
72,0
Public research institutions
6
3,7
10
6,2
16
9,9
129
80,1
Innovation and technology centres,
6
3,7
11
6,8
24
14,9
120
74,5
business development organisations
Source: Own elaboration based on enterprise survey, 2005.
Knowledge centres (universities, research institutes) and service centres and
organisations supporting the region’s business actors (innovation, technology and
business promotion organisations) have minimal role in this. 70–80% of firms did
not regard them as relevant information resources from the point of using them
for preparing and implementing their development projects. And naturally we
should not even forget that the applied response categories are not homogenous as
they may comprise complete relation systems as well: such as nodes and even
flexible contact sets (customers for example) and concrete organisational types.
The lower ratio of universities or research institutes in the set of information re-
sources may be explained by their preference of participating in extensive and
large-scale cooperation which occur less frequently. But the interviewees’ nega-
tive image on the functional role of innovation and technology centres as well as
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Csizmadia, Zoltán - Grosz, András : Regional Innovation System in West Transdanubia.
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Discussion Papers, No. 67.
of business promotion centres cannot be explained by such reasons as their mis-
sions are definitively targeted at fostering the region’s all enterprises competent or
concerned in innovation.
The most important sources of innovation belong to the enterprise’s own au-
thority scope. Personal contacts are resources eliciting positive outcomes through
the special and individual constellation of the enterprise’s staff structure – in similar
way to the internal knowledge set and knowledge resources refilled after a long-
term activity in the market. The management and sampling of clients and subcon-
tractors’ partnership system are also carried out within the enterprise’s organisa-
tional structure and do not depend on external factors or information providers.
8 The enterprises’ demand on innovation services
Several services are trying to foster and improve the innovativeness of business
enterprises. Their facilities are used mostly by SMEs as big firms generally have
the financial and human resources as well as the infrastructure necessary for a
continuous renewal, for the introduction and adaptation of new products, manu-
facturing procedures and technologies.
The major questions for assessing the demands towards a service provider can
be summarized as follows: What are the most popular services? Are there any
differences between the service demands of innovative and non-innovative enter-
prises and if so how can they be characterized? How can enterprises with complex
and/or special servicing demands be typified? How will the demand towards ser-
vices look like in the future?
Our assessment on the demands for services covering 39 forms of services was
conducted by a corporate questionnaire survey. (1. During the past three years
have you ever – not necessarily recently – used any innovation oriented services?
2. Are you going to use these services in the near future?) The bundle of innova-
tion services simultaneously comprises the routine basic activities of business
promotion (primarily used by SMEs) (such as business consulting), the incubation
elements (such as offices, secretariat) the needs arising from primarily technology
oriented development activities (product testing, calibration, laboratory use)) and
some solutions yet new in Hungary but to be used in the future by a narrow circle
of companies (such as business angel, risk capital, factoring etc.).
The classification of services was performed by factor analysis. Ten service
factors were separated from each other of which several can be bundled into a
more comprehensive service package. The services are as follows: 1) consulting
services associated with the running of business (taxation, accounting, legal ser-
vices); 2) services associated with the enterprises’ tendering operation; 3) opera-
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Discussion Papers, No. 67.
tional services (secretariat, manpower leasing); 4) Leasing and crediting services;
5) The imaging and communicational elements (marketing, business contacts,
information provision, cooperation) are relatively clearly separated and 6) special
knowledge related demands (market research and research) as well as regulation
and investment elements playing an important role in innovation (patents, risk
capital, investment consulting) are bundled into a special package. And finally
although in three packages and with some overlaps but 7) technological demands
associated with product development and qualification (such as positioning, prof-
itability revision, production planning, sample testing, product qualification, labo-
ratory use) should be regarded as a distinct group of services.
It can be stated as a rule that traditional and special innovation and business
oriented services are clearly separated at the enterprises participating in our sur-
vey but we can still clearly see what kind of service demands are likely to form
pairs (e.g. grants won through a tender coupled with support for writing tender
applications, or traditional business consulting services (in the fields of taxation,
accounting or legal affairs).
On the basis of the assessment on the region’s business enterprises demands
towards innovation services we can declare that enterprises generally use several
interrelated services simultaneously. The majority of enterprises do not have a
complex system of servicing demands in general they turn to external service
providers in particular matters only. Service demands can be ordered into a spe-
cial hierarchy (Figure 8), the majority of demands refer to various business con-
sulting related (legal advisory, accounting, taxation and financial counselling)
services, to product qualification and testing, to leasing, to current assets credit
solutions and to competition system related components. Very few firms use
innovation specific services (such as mentoring, business angel, patent consulting,
risk capital, special laboratory measurements, technological assessments etc.). On
the other hand innovative firms have much stronger demands for specific services
than the standard ones. In the next few years the structure and the level of servic-
ing demands will presumably follow the present scales.
As it was expected, medium-size and big firms with higher than average reve-
nue have a complex demand structure for innovation services (Figure 9). The
basic structure of expected demands can clearly be seen: Above average (innova-
tion) service demands are raised by young, development-oriented foreign Hun-
garian owned big and medium-sized firms with high revenues and selling their
products mostly on foreign markets. During the next few years no significant
changes can be expected in the demands against innovation services and in the
group of firms these services are delivered to.
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Discussion Papers, No. 67.
Figure 8
Frequencies of Demand Services by the Innovativeness of Enterprises, %
Non innovative
Innovative
Scouting
Market research
Patent, intellectual property consult.
Preferential operating credit
Leasing
Guarantee funds
Factoring
Business Angel
Risk capital involvement
Mentoring
Tender support
Tender preparation
Tax and financial consulting
Legal consulting
Accounting consulting
Business plan making
Partnership enlargement, mediation
Marketing and communication
Location, office, workshop
Info-communication technologies
Secretary services
Cleaning, operating services
Labour loaning
Product analysis
Product qualification
Technology analysis
Economy examination of techn.
Production planning and preparation
Loan of measuring tools
Calibration of measuring tools
First sample analysis
Technology development
Special laboratorial analysis
Use of special machineries
Special education programmes
Regular information providing
Participation to trade fairs, exhib.
Investment consulting
Technological cooperation
Yes
* An enterprise is innovative if at least one of the four innovati(on
%) types (product, process, organisa-
tion or marketing) was mentioned for 2003–2005.
Source: Own elaboration based on enterprise survey, 2006.
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Csizmadia, Zoltán - Grosz, András : Regional Innovation System in West Transdanubia.
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Discussion Papers, No. 67.
Figure 9
Complexity of Service Demanded by the Number of Employment
100,0%
Innovációs
Innovation
szo
s l
e g
r á
vi lt
c a
e t
s á
s
d o
e k
m i
a r
n á
d n
s t i
igény
80,0%
<= 3 (minimális
minimal (<4)
igény)
60,0%
3 - 9 (gyenge
weak (4-9)
igény)
9 - 15 (jelentıs
significant (10–15)
40,0%
igény)
15+ (nagy igény)
very significant
(15<)
20,0%
0,0%
micro small medium- large
mikro:5-10 fı
kisvállalkozás:
középvállalat:
nagyvállalat:
0–10 1
0
1 -5
1 0
– fı
50 51
5 -
125
– 0
2 fı
50 2
51
2 +
5 fı
0–...
Source: Own elaboration based on enterprise survey, 2006.
9 The supply side of the innovation system
West Transdanubia has several organizations and institutions delivering such
services that somehow foster or facilitate the innovativeness of enterprises or
provide a solution for problems arising in their everyday activities. The group of
these organisations is very heterogeneous. It comprises chambers of commerce
and industry looking back to old traditions in this field as well as business pro-
motion organisations who also can boast with more than 10 years of practice but
several new organisations have also emerged in this market often functioning as a
means of development policy with the aims of delivering, customized, innovation
facilitating services in several cases for a very limited circle of companies (for
example innovation centres, cluster organizations, university knowledge centres,
research centres and their different regional level combinations). For assessing the
widest cross-section of innovation oriented companies a personal interview was
made with 33 heads or persons responsible for innovation affairs at West Transda-
nubian companies with the purpose of revealing the supply side of their services.
There are substantial discrepancies and disparities in the accessibility of inno-
vation services. The majority of the palette of services has been delivered for 5–6
years within the region which means that somewhere at the turn of the millennium
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Discussion Papers, No. 67.
there was a blasting increase on the supply side of innovation services with a
massive emergence of new institutions, functions and responsibilities.
The majority of the palette of services has been delivered for 5–6 years within
the region which means that somewhere at the turn of the millennium there was a
blasting increase on the supply side of innovation services with a massive emer-
gence of new institutions, functions and responsibilities.
In general we can see a great number of parallelisms and overlaps in the re-
gion’s innovation service mechanism, as basic services are available at almost all
non-R&D oriented institutions. However the availability of specific services is
very limited as they are only delivered by only one or two actors having been
founded a few years ago only and still seeking for their own functions and roles in
the system of innovation services. In many cases even their existence and future is
ambiguous. So on one side there is a relatively big and complex system of institu-
tions working side by side, sometimes against each other where the expert knowl-
edge and competence necessary for competitiveness is available but the service
providers capable for responding for the demands set up by the needs of innova-
tion and principally by the needs of individual research and development are just
in the phase of formation yet: they have already been founded by now but their
future is ambiguous. The present institutional setting may serve as a basis for
establishing an innovation servicing system of an appropriate complexity in the
region (Table 8). The different organisational types of the innovation system have
certainly different servicing profiles of course. There seem to be great differences
among them and although some of their reasons seem to be justified, the size of
differences does not seem to be acceptable (Table 9).
It is evident that innovation parks and innovation centres are the nodes of the
supply side. They, located in largest centres, constitute 9% of the total
organizations surveyed. They reported on 14–26 services available directly at
them. This means that they must coordinate 18 different activities on the average
at an appropriate aspiration level. Regarding the full institutional system – to
make the results comparable – a typical service provider delivers 10 different
services on a market basis for its area’s business enterprises. Not calculating with
training-educational institutions (they are the weakest links in the system due to a
dissonancy between their servicing potentials and their real possibilities) we can
see that almost the same size of service palette – limited to 8–10 elements – is
available for each institutional sector.
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Table 8
The Frequency of Innovation Services in the 33 Organisations, %
Currently
Not Available, Not Available,
Available
but Plan in the
not Plan in
Future
the Future
Special education programmes
64
18
18
Tender preparation
61
9
30
Enlargement of business partnerships, partner
61
6
33
mediation
Participation to trade fairs and exhibitions
46
21
33
Regular information providing
49
9
42
Marketing and communication
49
6
45
Tax and financial consulting
43
9
48
Market research
43
9
48
Mentoring
40
9
51
Technology analysis
24
18
58
Business plan making
27
12
61
Technological cooperation possibilities
24
15
61
Investment consulting
30
9
61
Accounting consulting
30
6
64
Location, office, workshop
21
15
64
Special laboratorial analysis
18
18
64
Legal consulting
27
6
67
Technology development
18
15
67
Scouting
21
12
67
Product qualification
18
12
70
Use of special machineries
21
9
70
Patent, intellectual property consulting
27
0
73
Product analysis
18
6
76
Infocommunication technologies
18
6
76
Risk capital involvement
9
15
76
Preferential operating credit
18
3
79
Secretary services
18
3
79
First sample analysis
12
9
79
Loan of measuring and analysing tools
9
12
79
Tender support
18
0
82
Guarantee funds
15
3
82
Economy examination of technologies
6
9
85
Business Angel
6
9
85
Leasing
9
3
88
Calibration of measuring and analysing tools
3
9
88
Factoring
3
9
88
Production planning, production preparation
6
0
94
Cleaning, operating services
3
0
97
Labour loaning
6
3
91
Source: Own elaboration based on the institution’s interviews, 2006.
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Table 9
The Number of Services Provided by the Different Types of Organisation
Organisation Types
Average
N
%
Median
Min
Max
Innovation (parks and centres)
18.3
3
9
15.0
14
26
R&D
9.1
8
24
11.5
0
17
Education (esp. higher)
2.5
4
12
2.5
0
5
Development (regional and business)
9.3
6
18
10.5
0
17
Chambers
10.4
5
15
11.0
7
12
Clusters
9.1
7
21
8.0
4
17
Total (33 Organisations)
9.4
33
100
10.0
0
26
*ANOVA sig = 0.013
Source: Own elaboration based on the institution’s interviews, 2006.
10 The evaluation of the regional innovation system
In the interviews the experts of the organisations of the demand side of innovation
services tried to evaluate the efficiency of the formulating regional innovation
system and tried to outline a vision of an optimal – or ideal – system on the basis
of the summary of expert attitudes and ideas.
In the interviews the experts expressed their views on what level of organisa-
tion the system has achieved so far and what they think as optimal. After summa-
rizing the expert’s attitudes and ideas three questions were asked. 1) What prob-
lems are the concerned organisations facing now regarding innovation (what ad-
vantages and disadvantages they see)? 2) Proceeding from the present situation
what kind of opportunities and threats can be identified in the system? 3) What
standards should the ideal regional innovation system meet if we consider effi-
ciency and optimal functioning as of priority? Although it was not directly asked
but from the opinions we received a definite answer was formulated for the most
important question – Can we talk of a regional innovation system at all? If not,
why and what tasks are ahead of us?
Regarding the innovation system as a whole the interviews with the most im-
portant actors point out that unfortunately we cannot yet talk of a homogenous
system. The establishment of such a system requires a certain level of autonomy
and today the share of ambiguity and risks is too high to speak of a reliable sys-
tem. The support and funding system of innovation is just in an embryonic phase
now on regional level but right at the initial phase it is too complicated, slow and
in several cases unreliable as well. This will not really encourage the building of
comprehensive and integrating cooperation among the actors of innovation.
41
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Pécs : Centre for Regional Studies, 2008. 50. p.
Discussion Papers, No. 67.
Whether to formulate a hierarchical or vertical schemed cooperation system is not
decided yet in the region but without cooperation and coordination no systemic
organization can be built. The really operating intermediary agents mediating in-
formation and activities towards and from economic actors are also missing from
the system. And finally, the issue of full coverage, servicing and support of an
innovation process has not been solved yet.
In fact several interviews went around the major issues by reporting on posi-
tive phenomena (Figure 10) and they can be interpreted by reacting to the events
of the past two years: 1) the organisational foundations have been set up, they are
well-embedded into their environment and the new organisational forms are pro-
gressive and functionally separated; 2) The tendering system of regional innovation
has been launched, they are stimulating cooperation and upgrading the role of the
actors of the regional institutional system and even the formulating system itself.
Figure 10
Evaluation of the Regional Innovation System
Source: Own elaboration based on the institution’s interviews, 2006.
As regards the improvement of the system the different actors expressed their
opinions not only on the organisational financing and management type compo-
nents but besides the improvement of the three fundamental components the ap-
proach, the knowledge base, the characteristic features of the system’s contact
maintenance, integration, motivational and spatial coverage also were evaluated
by the majority of interviewees as influencing factors (Figure 11).
42
Csizmadia, Zoltán - Grosz, András : Regional Innovation System in West Transdanubia.
Pécs : Centre for Regional Studies, 2008. 50. p.
Discussion Papers, No. 67.
Figure 11
Hypothetical Ideal State of the Regional Innovation Systems
Connecting links
Organisation
Innovation management
Strengthening of
Decentralisation
Efficient coaching
bridging functions
Profit orientation
Management for
Consortiums of firms and
Simplicity, visibility,
all phases of innovation
innovation service providers
genuineness
Output orientation
for special tasks
Result consciousness
Filtering, searching,
Planned and conscious
Cost consciousness
motivation
contact building also
Specialised
Consultancy
in business field
Hierarchal/horizontal?
Demand orientation
Consciousness
Knowledge base
Approach changing
Sectoral knowledge basis
Consensus ability
Regional
Business demands
Understanding innovation
Visibility
Result and cost consciousness
Innovation System
Accessibility
Keeping and guarding the con-
Know each other
fidence and genuineness
Harmonisation
New innovation strategy
Contacts
Distribution
Regional coverage
Motivation
International cooperation
Regional resources
Full coverage
Mutual and fair financial
More intensive industry
Flexible, fast and predictable
Manage asymmetry
incentives
development in
Filtering by quality
and concentration
Prestige
border areas
Efficient controlling
Involvement of peripheries
Decision maker, coordination
Live contacts with firms
Private investments
Proportional innovation
and controller authority
and institution in the
Private R&D expenditures
infrastructure
Stop internal competition
border region
and conflicts
Source: Own elaboration based on the institution’s interviews, 2006.
On the grounds of the common knowledge base such a complex idealistically
typified system can be outlined which although implies some contradictions and
antagonistic elements but still can serve as a compass for planning the next steps.
Almost every components of such an innovation system can make use of the po-
tential advantages of inter-organisational cooperation partnerships and the inno-
vation networks built on their grounds. The two most tangible network aspects of
the presented idealistically drawn image are the intensification of international
contacts and the bettering of the bridging, intermediary and integrating functions
within the system itself. The support, follow-up counselling-type coordination and
the servicing of innovation seems to be more and more indispensable. Filtering
and sorting out companies successfully is more and more difficult without a living
and well-functioning contact system. In the organizational and financing dimen-
sion the alternative of centralization (a central organisation) – decentralization
(clones or shared functions creating a network) may build different networking
and contacting structures but a well-designed communication and resource shar-
ing system will surely most easily meet the demands set up without any regard
what scenario will be implemented in the future.
43
Csizmadia, Zoltán - Grosz, András : Regional Innovation System in West Transdanubia.
Pécs : Centre for Regional Studies, 2008. 50. p.
Discussion Papers, No. 67.
In the West Transdanubian region the organisation and delivery of concrete
innovation services as well as the building of new innovation structure facilities
(such as innovation and technology centres, research centres of cooperation, re-
gional university knowledge centres for servicing the demands of business sector:
vehicle industry, wood industry, renewable energy) with the facilitation of net-
working and clustering are the major instruments of increasing competitiveness.
Although the region does not have a homogenous cluster-oriented policy, both the
ongoing processes and the future developments can be interpreted as parts of an
organic development policy in which the primary target is providing, maintaining
and increasing comparative advantages for the region’s key sectors by ensuring an
adequate regional business environment and innovative milieu.
11 The future of the system – the basic components of an ideal
scenario
In the future clusterization processes and the promotion of SMEs must still be the
priority areas of regional economy and innovation. Improving the innovativeness
of the SME sector, building their innovation capacity, supporting their innovation
activity which should be focused on cooperation contacts, the ability of learning
lessons from each other should have a primacy in the programmes of innovation
centres, cluster organizations and other development agents. This is the only way
of enabling the region for increasing the ratio of intelligence and knowledge
based activities in its economic structure and to sustain their dominance in a long-
term perspective. With launching the Pannon Economic Initiative, the first of this
type initiatives in Hungary, with building cluster organizations, with the comple-
tion of innovation centres starting filling them up with content and with the estab-
lishment of the regional innovation agency and regional innovation council the
institutional network, an organisational network serving as a basis for the innova-
tion system of West Transdanubia has been created. The decentralized utilization
of a part of Innovation Fund is serving as a financial basis for the target oriented
running of the institutional system of innovation and for the utilization of funds
for innovation purposes. Beyond these functions not only the trivial organiza-
tional financing and management components should be developed.
Besides the basic components not only the trivial organisational, financing and
management segments should be developed. Expert opinions are outlining such a
complex, nine agent composed, idealistically typified system which although im-
plies some contradictions and antagonistic elements but still can serve as a compass
for planning the next steps. Almost every components of such an innovation system
can make use of the potential advantages of inter-organisational cooperation part-
44
Csizmadia, Zoltán - Grosz, András : Regional Innovation System in West Transdanubia.
Pécs : Centre for Regional Studies, 2008. 50. p.
Discussion Papers, No. 67.
nerships and the innovation networks built on their grounds. The two most tangible
network aspects of the presented idealistically drawn image are the intensification
of international contacts and the bettering of the bridging, intermediary and inte-
grating functions within the system itself. The support, follow-up counselling-type
coordination and the servicing of innovation seems to be more and more indispen-
sable. Filtering and sorting out companies successfully is more and more difficult
without a living and well-functioning contact system. In the organizational and
financing dimension the alternative of centralization (a central organisation) – de-
centralization (clones or shared functions creating a network) may build different
networking and contacting structures but a well-designed communication and re-
source sharing system will surely most easily meet the demands set up without any
regard what scenario will be implemented in the future.
45
Csizmadia, Zoltán - Grosz, András : Regional Innovation System in West Transdanubia.
Pécs : Centre for Regional Studies, 2008. 50. p.
Discussion Papers, No. 67.
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Discussion Papers, No. 67.
Annex
Interviewed Institutions and Organisations from the
Regional Innovation System’s Supply Side
Innovation and Technology Centres (3)
− INNONET – Innonet Innovation and Technology Centre
− SIIP – Sopron Innovation and Business Park
− CLAUDIUS – Claudius Business and Innovation Park
Knowledge Centres, Competence Centres, Research Institutions (9)
− SZE KKK – Széchenyi István University – Automotive, Electronic and Logistic
Cooperation Research Centre
− SZE RET – Széchenyi István University – Regional University Knowledge Centre for
Vehicle Industry
− NYME ERFARET – University of West Hungary – Regional University Knowledge
Centre for Forest and Wood Utilisations
− NYME KKK – University of West Hungary – Environment Resource Management and
Protection Cooperation Research Centre
− NYME KIK – University of West Hungary – Environment Competence and Innovation
Centre
− NYME FAIMEI – University of West Hungary – Faculty of Wood Sciences,
Laboratory for Material and Product Analysis
− ETI Sopron – Hungarian Forest Research Institute, Sopron Experimental Station
− ETI Sárvár – Hungarian Forest Research Institute, Sárvár Experimental Station and
Arboretum
− MTA RKK NYUTI – Centre for Regional Studies, West Hungarian Research Institute
Business Development Organisations (3)
− KVA – Kisalföld Foundation for Enterprise Promotion
− ZMVA – Zala County Foundation for Enterprise Promotion
− VRVA – Vas County and Szombathely City Regional Foundation for Enterprise
Promotion
Regional Development Organisations (4)
− NYUPAN – West Pannon Development Co.
− WPRDA PBI – West Pannon Regional Development Agency, Pannon Business
Initiative
− WPRIA – Pannon Novum West Pannon Regional Innovation Agency
− PBN – Pannon Business Network
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Csizmadia, Zoltán - Grosz, András : Regional Innovation System in West Transdanubia.
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Discussion Papers, No. 67.
Chambers (5)
− GYMSKIK – Chamber of Commerce and Industry for Gyır-Moson-Sopron County
− VMKIK – Chamber of Commerce and Industry for Vas County
− ZMKIK – Chamber of Commerce and Industry for Zala County
− Sopron KIK – Chamber of Commerce and Industry for Sopron
− Kanizsa KIK – Chamber of Commerce and Industry for Nagykanizsa
Higher Education (4)
− PE GMK – Pannon University , Georgikon Faculty of Agriculture
− NYME MÉK – University of West Hungary, Faculty of Agriculture and Food Science
− BGF – Budapest Business School, Collage of Finance and Accountancy, Institute of
Zalaegerszeg
− REMEK – Szombathely Regional Education Centre
Cluster Organisations (7)
− PANAC – Pannon Automotive Cluster
− PANFA – Pannon Wood and Furniture Cluster
− PANTERM – Pannon Thermal Cluster
− PANLOG – Pannon Logistics Cluster
− PANTEX – Pannon Textile Cluster
− PHTK – Pannon Local Product Cluster
− PANEL – Pannon Mechatronics Cluster
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Csizmadia, Zoltán - Grosz, András : Regional Innovation System in West Transdanubia.
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Discussion Papers, No. 67.
Abbreviations
CIS – Community Innovation Survey
EIS – European Innovation Scoreboard
EU – European Union
EUR – Euro
FDI – Foreign Direct Investment
GDP – Gross Domestic Product
HUF – Hungarian Forint
KKK – Cooperation Research Centre
NUTS – Statistical Nomenclature of Territorial Units
NYME ERFARET – University of West Hungary, Regional University Knowledge Centre for
Forest and Wood Utilisations
NYME KKK – University of West Hungary, Environment Resource Management and Protection
Cooperation Research Centre
PBI – Pannon Business Initiative
PBN – Pannon Business Network
PPS – Purchasing Power Standard
R&D Research and Development
RET – Regional University Knowledge Centre
RIS – Regional Innovation Strategy
SME – Small and Medium Sized Enterprises
SZE JRET – Széchenyi István University, Regional University Knowledge Centre for
Vehicle Industry
SZE KKK – Széchenyi István University, Automotive, Electronic and Logistic Coopera-
tion Research Centre
TEP – Technology Foresight Programme
WPRDA – West Pannon Regional Development Agency
WPRDC – West Pannon Regional Development Council
WPRIA – West Pannon Regional Innovation Agency
50
Discussion Papers 2008. No. 67.
Regional Innovation System in West Transdanubia
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Regional Innovation System in West Transdanubia
Papers published in the Discussion Papers series
DISCUSSION PAPERS / SPECIALS
BENKİNÉ LODNER, Dorottya (ed.) (1988): Environmental Control and Policy: Proceedings of
the Hungarian–Polish Seminar in the Theoretical Problems of Environmental Control
and Policy
OROSZ, Éva (ed.) (1988): Spatial Organisation and Regional Development Papers of the 6th Polish–
Hungarian geographical Seminar
DURÓ, Annamária (ed.) (1993): Spatial Research and the Social–Political Changes: Papers of the
7th Polish–Hungarian Seminar
DURÓ, Annamária (ed.) (1999): Spatial Research in Support of the European Integration.
Proceedings of the 11th Polish–Hungarian Geographical Seminar (Mátraháza, Hungary
17–22 September, 1998)
GÁL, Zoltán (ed.) (2001): Role of the Regions in the Enlarging European Union
HORVÁTH, Gyula (ed.) (2002): Regional Challenges of the Transition in Bulgaria and Hungary
KOVÁCS, András Donát (ed.) (2004): New Aspects of Regional Transformation and the Urban-
Rural Relationship
BARANYI, Béla (ed.) (2005): Hungarian–Romanian and Hungarian–Ukrainian border regions as
areas of co-operation along the external borders of Europe
ENYEDI, György – KOVÁCS, Zoltán (eds.) (2006): Social Changes and Social Sustainability in
Historical Urban Centres. The Case of Central Europe
KOVÁCS, András Donát (ed.) (2007): Regionality and/or locality
SZIRMAI, Viktória (ed.) (2007): Social Inequalities in Urban Areas and Globalization. The Case of
Central Europe
ILLÉS, Iván (2008): Visions and Strategies in the Carpathian Area (VASICA)
DISCUSSION PAPERS
No. 1
OROSZ, Éva (1986): Critical Issues in the Development of Hungarian Public Health with
Special Regard to Spatial Differences
No. 2
ENYEDI, György – ZENTAI, Viola (1986): Environmental Policy in Hungary
No. 3
HAJDÚ, Zoltán (1987): Administrative Division and Administrative Geography in
Hungary
No. 4
SIKOS T., Tamás (1987): Investigations of Social Infrastructure in Rural Settlements of
Borsod County
No. 5
HORVÁTH, Gyula (1987): Development of the Regional Management of the Economy in
East-Central Europe
No. 6
PÁLNÉ KOVÁCS, Ilona (1988): Chance of Local Independence in Hungary
No. 7
FARAGÓ, László – HRUBI, László (1988): Development Possibilities of Backward
Areas in Hungary
No. 8
SZÖRÉNYINÉ KUKORELLI, Irén (1990): Role of the Accessibility in Development and
Functioning of Settlements
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Regional Innovation System in West Transdanubia
No. 9
ENYEDI, György (1990): New Basis for Regional and Urban Policies in East-Central
Europe
No. 10
RECHNITZER, János (1990): Regional Spread of Computer Technology in Hungary
No. 11
SIKOS T., Tamás (1992): Types of Social Infrastructure in Hungary (to be not published)
No. 12
HORVÁTH, Gyula – HRUBI, László (1992): Restructuring and Regional Policy in
Hungary
No. 13
ERDİSI, Ferenc (1992): Transportation Effects on Spatial Structure of Hungary
No. 14
PÁLNÉ KOVÁCS, Ilona (1992): The Basic Political and Structural Problems in the
Workings of Local Governments in Hungary
No. 15
PFEIL, Edit (1992): Local Governments and System Change. The Case of a Regional
Centre
No. 16
HORVÁTH, Gyula (1992): Culture and Urban Development (The Case of Pécs)
No. 17
HAJDÚ, Zoltán (1993): Settlement Network Development Policy in Hungary in the
Period of State Socialism (1949–1985)
No. 18
KOVÁCS, Teréz (1993): Borderland Situation as It Is Seen by a Sociologist
No. 19
HRUBI, L. – KRAFTNÉ SOMOGYI, Gabriella (eds.) (1994): Small and medium-sized
firms and the role of private industry in Hungary
No. 20
BENKİNÉ Lodner, Dorottya (1995): The Legal-Administrative Questions of
Environmental Protection in the Republic of Hungary
No. 21 ENYEDI, György (1998): Transformation in Central European Postsocialist Cities
No. 22 HAJDÚ, Zoltán (1998): Changes in the Politico-Geographical Position of Hungary in the
20th Century
No. 23
HORVÁTH, Gyula (1998): Regional and Cohesion Policy in Hungary
No. 24
BUDAY-SÁNTHA, Attila (1998): Sustainable Agricultural Development in the Region
of the Lake Balaton
No. 25
LADOS, Mihály (1998): Future Perspective for Local Government Finance in Hungary
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NAGY, Erika (1999): Fall and Revival of City Centre Retailing: Planning an Urban
Function in Leicester, Britain
No. 27
BELUSZKY, Pál (1999): The Hungarian Urban Network at the End of the Second
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No. 28
RÁCZ, Lajos (1999): Climate History of Hungary Since the 16th Century: Past, Present
and Future
No. 29
RAVE, Simone (1999): Regional Development in Hungary and Its Preparation for the
Structural Funds
No. 30
BARTA, Györgyi (1999): Industrial Restructuring in the Budapest Agglomeration
No. 31
BARANYI, Béla–BALCSÓK, István–DANCS, László–MEZİ, Barna (1999): Borderland
Situation and Peripherality in the North-Eastern Part of the Great Hungarian Plain
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RECHNITZER, János (2000): The Features of the Transition of Hungary’s Regional
System
No. 33
MURÁNYI, István–PÉTER, Judit–SZARVÁK, Tibor–SZOBOSZLAI, Zsolt (2000):
Civil Organisations and Regional Identity in the South Hungarian Great Plain
No. 34
KOVÁCS, Teréz (2001): Rural Development in Hungary
No. 35
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NAGY, Imre (2001): Cross-Border Co-operation in the Border Region of the Southern
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53
Discussion Papers 2008. No. 67.
Regional Innovation System in West Transdanubia
No. 37
BELUSZKY, Pál (2002): The Spatial Differences of Modernisation in Hungary at the
Beginning of the 20th Century
No. 38
BARANYI, Béla (2002): Before Schengen – Ready for Schengen. Euroregional
Organisations and New Interregional Formations at the Eastern Borders of Hungary
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KERESZTÉLY, Krisztina (2002): The Role of the State in the Urban Development of
Budapest
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HORVÁTH, Gyula (2002): Report on the Research Results of the Centre for Regional
Studies of the Hungarian Academy of Sciences
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– SZÉPVÖLGYI, Ákos (2003): The City and its Environment: Competition and/or Co-
operation? (A Hungarian Case Study)
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CSATÁRI, Bálint–KANALAS, Imre–NAGY, Gábor –SZARVÁK, Tibor (2004): Regions
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FARAGÓ, László (2004): The General Theory of Public (Spatial) Planning (The Social
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HAJDÚ, Zoltán (2004): Carpathian Basin and the Development of the Hungarian
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GÁL, Zoltán (2004): Spatial Development and the Expanding European Integration of the
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BELUSZKY, Pál – GYİRI, Róbert (2005): The Hungarian Urban Network in the
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G. FEKETE, Éva (2005): Long-term Unemployment and Its Alleviation in Rural Areas
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Case of Bóly in South Transdanubia
No. 58
SZIRMAI, Viktória (2007): The Social Characteristics of Hungarian Historic City Centres
No. 59
ERDİSI, Ferenc – GÁL, Zoltán – GIPP, Christoph – VARJÚ, Viktor (2007): Path
Dependency or Route Flexibility in Demand Responsive Transport? The Case Study of
TWIST project
No. 60
PÓLA, Péter (2007): The Economic Chambers and the Enforcement of Local Economic
Interests
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Discussion Papers 2008. No. 67.
Regional Innovation System in West Transdanubia
No. 61
BUDAY-SÁNTHA, Attila (2007): Development Issues of the Balaton Region
No. 62
LUX, Gábor (2008): Industrial Development, Public Policy and Spatial Differentiation in
Central Europe: Continuities and Change
No. 63
MEZEI, Cecília (2008): The Role of Hungarian Local Governments in Local Economic
Development
No. 64
NAGY, Gábor (2008): The State of the Info-communication Markets in Dél-Alföld
Region – Hungary
No. 65
HORVÁTH, Gyula (2008): Regional Transformation in Russia
No. 66
BELUSZKY, Pál – SIKOS T., Tamás (2008): Changing Village-Typology of Rural
Settlements in Hungary at the Beginning of the Third Millennium
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