Technology Development in Transition - The Case of Hungarian Industry -

The reform of 1989 exposed Hungarian industry to foreign competition and confronted it to the loss of the vast and undemanding COMECON market, the withdrawal of public support and the need for privatisation. Based on twenty-four interviews in pharmaceutical, electronics, automotive and textile companies, this paper gives insight into the efforts made by Hungarian industry to upgrade its technology in response to these pressures. The patterns found reflect the shift away from the old strategy of autarchic imitation of western technology based on own research and development towards catch-up through acquisition of western product and process know-how. The firms' modernisation activities were heavily driven by foreign investment and financial support from public agencies, but there are drawbacks associated with both, especially foreign investment which has in some cases contributed to the erosion of indigenous research capability. Science and technology institutions played an important role in the upgrading of industrial technology before the reform, but linkages with industry have eroded in the 1990s as a result of the drastic decline in state funding for science and technology and the financial crisis in industry. Financial support from the European Union for science and technology in the sample firms is reviewed and a number of suggestions are made for its improvement, so as to better reflect Hungary's current needs in the context of its increasing integration with the European Union.