IDEAS home Printed from
   My bibliography  Save this paper

Will Restructuring Hungarian Companies Innovate? An Investigation Based on Joseph Berliners's Soviet Industry


  • John P. Bonin
  • Istvan Abel


Based on insights from Joseph Berliner's work on innovation in the Soviet centrally planned economy and its reform variants, we analyze process innovation (technological development) and product development in restructuring Hungarian companies from 1992 to 1995. Using data from a survey questionnaire responded to by 325 Hungarian companies, we conclude that decision-makers recognize the increasing uncertainty in their business environment and respond to it by taking more aggressive strategies. However, Hungarian companies practice product imitation rather than product development as only about a third of the new products introduced are new to either Hungarian or global markets. Furthermore, although technological development is recognized as important, only about a third of the respondents indicate any improvement in the company's technology and, of these, only about a quarter report that the change resulted in an up-to-date technology. Berliner identifies public ownership as a major impediment to innovation and considers the invisible foot of market competition to be a significant incentive for innovation. From cross tabulations of responses to various questions probing a company's implementation of new production processes, we find that foreign-owned companies are more likely to be involved in such activity and, of all companies engaged in this process innovation, state-owned companies find it less profitable than do companies of other ownership types. Regarding research and product development, we find that state-owned companies spend significantly less on applied research than do foreign-owned firms. Measuring exposure to external market competition by export intensity in a sub-sample of the companies, we find that a company with higher export intensity is more likely to introduce minor technological improvements. Although ownership type is not a significant determinant of export intensity, state-owned companies tend to adjust their product lines in foreign markets to compete with other Hungarian companies. Global market competition promotes minor technological development and makes state-owned companies more conscious of product development while public ownership deters process innovation in Hungary. Hence, in transition economies, the imitation stage comes first as restructuring companies try to catch up to world class standards in both technologies and products; however preventing foreign participation in the privatization process is likely to impede innovation and stall company restructuring.

Suggested Citation

  • John P. Bonin & Istvan Abel, 1998. "Will Restructuring Hungarian Companies Innovate? An Investigation Based on Joseph Berliners's Soviet Industry," William Davidson Institute Working Papers Series 131, William Davidson Institute at the University of Michigan.
  • Handle: RePEc:wdi:papers:1998-131

    Download full text from publisher

    File URL:
    Download Restriction: no

    More about this item

    JEL classification:

    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • L21 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Business Objectives of the Firm
    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory

    NEP fields

    This paper has been announced in the following NEP Reports:


    Access and download statistics


    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:wdi:papers:1998-131. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (WDI). General contact details of provider: .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.