Zsuzsanna Zsibók (p)

Gabor Lux

Central and Eastern European countries experienced a slow recovery, then a high-pressure economy after the global financial and economic crisis in the 2010s. As a result, they achieved an on-going convergence to the European Union’s average level of development in terms of per capita GDP (partly affected by the slowing down of the Mediterranean member states’ growth). The dominance of the capital city regions in driving economic growth is still reinforced, and the spatial distribution of foreign direct investments also plays a significant role in shaping regional inequalities. Despite explicit convergence at the national level, interregional income differentials are persistent and left-behind regions experience on-going stagnation. Although capital city regions enjoy above-average level of economic development, many regions in the eastern periphery are amongst the 20 poorest regions within the EU. Our research uses exploratory statistical data analysis and multivariate statistical analysis, e.g., principal component analysis, to investigate the relative importance and the territorial dynamics of selected regional economic indicators. We intend to focus on those variables that allow us to capture the working of the high-pressure economy, such as labour market indicators and investments, including foreign direct investments. We use publicly available statistical data in a regional disaggregation collected from Eurostat and national statistical offices. Our preliminary results indicate that FDI has an essential role in ensuring a relatively high level of regional development, but the growth performance of FDI host regions proved to be unstable.

Stefan Apostol (p)

Zsuzsanna Zsibók

Starting from 2014, the economic development of European regions is shaped by the Smart Specialisation innovation policy. Despite advancements in methods for identifying new paths for economic development, these paths frequently lack a long-term perspective. Diversification of economic activities is widely regarded as the driving force behind prosperous industries, but the occurring processes frequently overlook the significance of contextual factors. I examine the relationship between the contextual factors that influence the emergence of a new industry, several industry groupings, and the complexity of related industries, as complexity in similar industries would indicate the existence of similar production capabilities. However, the aforementioned metrics apply primarily to incumbent industries and capabilities. In order to understand possible future economic advancement, I look at the technology upgrading and manufacturing capabilities of countries, but also prioritization of industries that are similar to peer groups industries that serve as models for diversification. I measure the entrepreneurial environment by applying the penalty for bottleneck Entrepreneurial Ecosystem measurement method. Economic complexity is calculated using the product space approach. Patent data is used for technology upgrading measurement. To make policy recommendations for path undertaking, I employ frontier analysis and New Structural Economics recommendations. Combining these dimensions provides a more complete picture of the structure and drivers of economic growth. Certain types of industries benefit from contextual factors, however peer comparisons have a greater impact on growth paths than best practices do.

Balázs Páger (p)

Stefan Apostol

Entrepreneurship is widely believed to be an essential driver of economic development, employment, and productivity growth at the national and regional levels. Several studies proved that new firms positively affect economic development; however, the magnitude of the impact varies significantly over regions. The context has an important role, as it regulates the quality and outcome of the entrepreneurial activity. New entry firms result from the interaction between individual attributes and the context. Entrepreneurial behaviour and attitudes, together with the context, could lead to an increased level of new startups.

FDI companies have essential contributions to economic development and the domestic stock of new knowledge and regional R&D. However, their effect on entrepreneurial activity is somewhat ambiguous. On the one hand, FDI has a positive impact on entrepreneurial activity through the context, increasing demand, and knowledge spillovers. But on the other hand, the presence of FDI may crowd out local firms from the local markets, attract scarce local resources from domestic firms and influence the level of competition and wages. Previous studies revealed a somewhat positive effect of FDI on the entry of new firms, but the extent of this effect was varying.

Examining the effect of FDI companies on firm entry is an emerging field within entrepreneurship literature. This study contributes to this field by investigating how the presence of FDI influences entrepreneurial activity in Hungarian agglomeration areas. Building on a panel dataset of Hungarian firms provided by the Databank of the Centre for Economic and Regional Studies, the paper analyses whether the effects of the presence of FDI companies on firm entries is negative or positive. In the frame of this investigation, we attempt to reveal both the cross-sectional (region, industry) impacts and the time effects.

Gabor Lux (p)

Balázs Páger

This paper is concerned with the varied development paths undertaken by Hungarian-owned family firms in the manufacturing sector. Whereas large, FDI-based industrial projects have received preference by economic policy, there is a growing realm of evidence suggesting that medium-sized, usually family-owned enterprises play a similarly vital role in regional development. Academic papers on the German Mittelstand model and its generalised variants contend that mid-sized family firms have a special capability for exploiting scarce, locally embedded resources to undertake “high-road” growth strategies combining high value-added production with localised social advantages, i.e. reinvestment into local human capital, industrial networks, and knowledge sets.

This paper summarises the results of multiple research efforts into understanding how such firms grow, internationalise, innovate, and upgrade their activities in the context of Hungarian regions characterised by a peripheral geographic status, uncertain business environment; and until relatively recently, strong resource constraints. It is proposed that while family firms possess certain core values and growth behaviour which make them similar to the German Mittelstand companies, they show substantial difference along upgrading and growth paths.

One strategy type relies on increasing integration into global value chains (GVCs), although with varied levels of added value: some of these firms undertake substantial process innovation and some product innovation to exploit the benefits of export-based learning, while others have become stuck in contract manufacturing based on external knowledge sets, and specialising in labour-intensive activities. Very few of these firms have, so far, progressed beyond Tier 3 supplier status, and their status comes with both benefits and considerable shortcomings/risks.

Other firms, partially out of a desire to avoid or diversify away from FDI dependency, have increasingly focused on own product development, engaging in intensive “seeking behaviour” to find and exploit a product niche they can excel in. Few of these firms have, so far, benefited from cooperation with local universities or R&D centres, demonstrating the weakness of Hungary’s regional innovation systems; this is all the more problematic when considering the counter-examples, where spinoff innovations have generated substantial strategic advantage for family enterprises. It is also an open question to what extent local or national-level excellence allows firms to compete on the international level: while many of them show strong and successful export activity, significant barriers stand before strong internationalisation and a breakthrough success on European and/or global markets.