Why Innovations?

Over the last ten years, economic growth in East Central Europe and Poland in particular has been driven by a combination of direct foreign investment and the emergence of new, indigenous firms. Polish start-ups have tended to concentrate on sectors left completely underdeveloped by centrally planned system such as services, or on the production of relatively simple goods for which there was an immediate and palpable demand. At the same time, the multinational corporations tended to concentrate on developing production and distribution platforms exclusively for their existing product lines. But there are good reasons to believe that the possibilities for “extensive" growth in the region have been exhausted. It appears that neither the foreign investment nor the indigenous capital formation that has occurred over the last ten years has sufficiently mobilized and developed the innovative capacity that the region has and needs to meet the competitive challenges of the global economy. And without acceleration of the innovation dynamic supported by public and private infrastructure, the already declining growth rates will remain dangerously low.

The last decade demonstrated that the countries with the highest growth rates are also those economies which have had the most innovative firms. Ireland, the fastest growing economy in the European Union in the last decade, is a perfect example. Ireland's success has been largely due to the presence of foreign investors in high-growth industries with a high intensity of embedded intellectual property. Similar examples can be found in Finland (which in the last decade went from dependency on exports to the Soviet Union and a deep recession when those markets collapsed to being the home country of such innovative firms as Nokia) and in certain East Asian countries (e.g., Singapore, Taiwan).