R&D Behaviour of Firms in Transition Economies: An Analysis of the Key Determinants

Abstract

According to OECD data, all transitional economies have experienced cuts in R&D expenditures since the beginning of reforms, in absolute terms and in relation to GDP (Radosevic and Auriol, 1999; European Commission, 1994). The European economies in transition were, indeed, the only part of the world that experienced a substantial decline in R&D activity in the first half of 1990s. The OECD data show that the largest fall was recorded for industrial R&D. Since there is no breakdown of industry R&D data between in-house and external R&D, little is known about R&D behaviour at the firm level, particularly about the main factors influencing that behaviour. Where individual country data on R&D behaviour at the firm level have been available, early attempts to identify the determinants of levels of R&D did not produce clear-cut results. For example, Inzelt (1996) reports that in an analysis of patterns of interaction between R&D intensity and other firm characteristics (including size, ownership, and growth rates) based on a sample of 46 Hungarian firms, not even a moderate degree of correlation was found between the examined variables. The objective of this paper is to extend our knowledge of R&D behaviour of firms in transitional economies by finding out what the determinants of that behaviour really are.