Technology upgrading and growth in Central and Eastern Europe

The R&D and technology issues of relevance for catching up cannot be understood or conceptualised only within the R&D based growth model. With this motivation in mind, we have created a composite indicator of innovation capacity and performance of the CEECs, as well as of the EU25, which is meaningful from the perspective of countries lagging behind the world technology frontier. Three conclusions stem from the Index of Technology Upgrading components which have major relevance for policy making. Firstly, we observe a decline in most of the EU25 economies of their production capabilities despite, on average, significant improvements in R&D and technology capability. This suggests that the EU has serious weaknesses in converting its R&D and technological knowledge into production capabilities. Secondly, the Index of Technology Upgrading components show improvements in infrastructure and structural changes in most of the EU economies, but an overall relative decline in firm capabilities. This shows the limitations of current EU supply oriented RDI policies which continue to reinforce the so-called European paradox. Thirdly, increased knowledge interaction between 2006 and 2015 has been confined to the German-led Central European manufacturing cluster. It seems that the EU RDI policy operates as a substitute for technology and knowledge exchange rather than as a complement to it.