Central and East European Innovation Systems as Knowledge Sources for Foreign Affiliates’ Own Technological Activity in CEE

Potential technological effects via inward FDI not only emerge from direct, internal technology transfer. The contribution to technological catch-up development is also expected to emanate from the diffusion of knowledge and technology between the host economy and its foreign affiliates (the ‘external’ part of technology transfer and spillovers). This technology transfer may assume the characteristics of a ‘transfer’ of knowledge and technology (that is, intentional, enshrined in contracts, and not giving rise to externalities) and/or can rather be of a ‘spillover’ type, where this diffusion is unintentional and not regulated in contracts, and hence gives rise to externalities. In line with the conceptualisation of research in this work, this distinction does not play a role in the analysis of this chapter (nor in the following one, Chapter 6). The focus in this chapter is rather on the conditions of positive technological effects from the host innovation system for the foreign affiliates hosted by them. Those conditions are deduced from theoretical (or conceptual) and empirical research, and give rise to a set of hypotheses on what drives the role of the host innovation system for technological activity of the foreign affiliate.1 The empirical analysis presented here tests whether empirical support for those hypotheses can be found in the particular case of CEECs. In terms of theories, the analysis mainly draws from Cantwell’s technology accumulation approach within the body of international business literature, assuming that there is a “complex dynamic interaction of the ownership advantage of groups of firms and the locational advantages of the sites in which they produce” (Cantwell, 1989, p. 207).