Study on factors influencing Hungarian companies’ innovation activities

Hungary’s position in various innovation rankings of the EU (European Innovation Score-board, Community Innovation Survey, InvestmentSurvey of the European Investment Bank) roughly corresponds to itslevel of development: out of the 28 EU Member States, Hungaryoccupies the 4th-7th place from behind.The survey conducted in the framework of our research demonstrated that

• 80 percent of firms surveyed conducted smaller or larger innovations in the past three years or at present. That is a much higher rate than that in the CIS survey. One explanation of this difference might be that more attention was given to the concept of innovation in our survey which raised respondents’ awareness.

• 60 percent of product or serviceinnovation was virtually completely the same as products already on the market, while only 5 percent was completely new. Thus, only a small portion of companies conduct innovation to overcome competitors, most innovation are of a ‘follower’ type.

• Only about 10 percent of respondents introduced any changes in their production processor/and marketingactivity, and almost one-third of the respondent companies implemented organisational innovation.

• Aslightly different picture emerges in the light of the question of how companies perceive theneed for innovation. Small entrepreneurs (less than 19 employees) tend to believe that the market is not interested in any innovation, while larger firms are convinced that to stay on the current market, innovation is definitely required.

• Not surprisingly, respondents identified skilled labour shortages as by far the biggest barrier to innovation (82%). This is followed by market uncertainty (50%) and problems of funding (44%).

The survey was supplemented byinterviews with corporate managers. The interviews largely supported the results of the survey and provided a wealth of additional information.Based on the survey results and the conclusion form the interviews, the top threebarriers to innovation in Hungary could be identified (not in hierarchical order):

• Most companies which are not innovative have the belief that innovation is not needed at all. This comes from management reluctance, lack of knowledge and from the lack of a long-term strategic approach. Although the macroeconomic environment of innovation cannot be ignored, the innovation capacity of companies is highly dependent on the professional skills and approach of the firm managers.

• Lack of relevant skills: although labour shortage is a severe factor in Hungary, which innovation should in theory alleviate, proper knowledge on this subject is often missing. This is rooted in the anomalies of the education and training systems. A weak competitiveness is also a relevant factor, as it contributes to brain drain, while the economy struggles to attract modern expertise. A large part of the growth relies on cheap labour, regional disparities are high, particularly in productivity.

• Unpredictability of public innovation management and support institutions: The public institutionsaiming at support of conducting firm innovation (and/or R&D) have frequently changed in recent decade. Not only the name and organisation of these public institutions have changed, but also the concept has often gone through significant changes.

Az Európai Bizottság magyarországi képviselete N° NP/2019-17/BUD
February 2020
Project leader:
Éva Palócz
Zoltán Matheika, Péter Vakhal, Tamás Gebei