The applicability of the concept of national innovation systems to transition economies.

To what extent is a process-based approach of NIS transferable to the case of transition countries? Even if many efforts have been undertaken to develop the concept of NIS through various approaches, there are not as much studies focusing on NIS outside the group of highly industrialized as on developed countries. Examples for this are studies in Nelson (1993a) or the study of Dahlman and Nelson (1995) examining the relationships among social absorptive capability, NIS and economic performance in developing countries. Arocena and Sutz (2000) argue that, for using the NIS approach in the 'South', the approach has to be complemented by a southern perspective, as the concept of NIS has been developed in the 'North', e.g. in developed countries. Furthermore, 'Southern heads are also needed for adapting such intellectual tools when the situation and possible futures of a peripheral country are studied' (Arocena and Sutz 2000: 55). Then, the approach can be useful for studying the specifics of innovation policies and processes in developing countries. They point out that the NIS approach was build upon empirical studies rooted in Europe, the U.S. and Japan, whose institutions work in a system like manner. In developing countries, micro-innovative strength remains isolated and encapsulated. In addition, many institutions that are important for innovative activities do not exist. Beyond this, '[...] industrial innovation in developing countries is highly informal, i.e. not products of formally articulated R&D activities. In addition, dominant cultural patterns of these countries undervalue scientific knowledge and technological innovation' (Intarakumnerd et al. (2002: 1446). If the concept of NIS should be useable in developing countries, it has to be adapted to the specific characteristics of these countries. Nevertheless, studies in this area are an exception. (2) As we will see, this line of reasoning is transferable to problems emerging when using the concept of NIS in the 'East', i.e. in transition economies of Central and Eastern Europe. Compared to structure-based approaches of NIS, a process-based approach is particularly suitable for analyzing systems of innovation in these economies.

The term 'transition' has to be defined in a twofold way: First, transition processes are the transformation of socialist economies into open market economies. Second, transition processes include a reorientation from being integrated with other socialist countries towards integration with global capitalist economies (Hogselius 2005: 5f). Therefore, we define transition processes as an 'East-West' kind of transition in terms of marketization after decades of central planning in the old Soviet-era structures. In socialist systems economic life was under the control of a single party, like the Socialist Workers' Party in Hungary or the United Workers' Party in Poland. State ownership of means of production was established. Furthermore, socialist economies are 'centrally planned economies', as the plan was the main coordinating mechanism encompassing the overall economic activities of the economy. Out of this emerged a specific industrial structure. First of all, there was no market at all; the tasks of the market were completely inherited by the plan specified by political authorities. Second, there was a lack of small and medium enterprises. The activities of subcontractors and maintenance suppliers observable in market oligopolies were internalized in socialist systems, as each big enterprise developed such units within its own structure. Third, large socialist enterprises were not just production and management units, but performed also political, administrative and social functions (Lavigne 1995). This structure poses one of the big problems of transition. The countries in Central and Eastern Europe need a modern, market-oriented industrial structure. Accordingly, transformation is intended to build a market economy with a profit motive and reduced government intervention. But, even if transition economies all aim at developing a market economy, this does not imply that every country of Central and Eastern Europe develops identical internal transformation processes and institutional and organizational set-ups resulting from these. In fact, a multiplicity of development paths and institutional and organizational set-ups are observable in that region, since all economic, social, cultural and political aspects of a country have an impact on the internal transformation process. As organizations and individuals do create their future based on their historical experiences, and as the historical basis of transition economies differ, they are all building up different systems of innovation, following the assumption of the path-dependence of technological change.

Based on the argumentation of a structure-based approach on NIS there is a twofold answer concerning the applicability to transition economies: First, Eastern and Western European countries differ in terms of their historical experiences and have therefore build up different systems of innovation based on different institutional and organizational set-ups. Compared to market economies, socialist economies had organized their innovative processes in a completely different way by placing the responsibility for the execution of these processes on other types of institutions and organizations. 'For example, nuclear power technologies developed rapidly after the war in both capitalist and socialist worlds, but the different and separated nuclear power systems of innovation favored radically different technological solutions in Eastern and Western countries, and the innovation process was organized in completely different ways and was subject to totally different institutional arrangements' (Hogselius 2005: 33). Furthermore, as this approach was developed in Western countries, it is based upon the principles of a market economy with corresponding institutional and organizational set-ups. At that time, a fully implementation of these can not be guaranteed in transition economies. A lack of constitutional legality is one indication for an inadequately implemented market economy as, for example, the asset stripping and nationalization of the Russian petroleum company (Yukos 2004). Second, when applying the structure-based approach, national transition processes in Central and Eastern Europe are not comparable with each other, as every development path is based on its own national history. As a result, institutions and organizations are restructured on the basis of old values deeply rooted in the national realization of a socialist system and selective borrowing from the West. One of the main building blocks of structural transformation during transition is privatization in terms of creating a greenfield private sector and transfering state-owned into private enterprises. Transition economies did pursue different aims when choosing their privatization strategies. The Czechoslovakian government aimed at taking away state property from its former communist management, that has almost completely survived the change of the political regime. As sell-offs were impossible, but a fast privatization process was favored, Czechoslovakia launched a privatization programme based on vouchers, which allowed citizens to get shares in state-owned enterprises at a symbolical price. Hungary, on the other side, was the only transition country that tries to exploit the fiscal potential of privatization by selling off state-owned facilities instead of giving them away. Another example is the discussion on the speed of the transition process. 'The choice of the shock therapy meant that the new government excluded any move back to the past, and capitalized on the political and social concensus so as to impose drastic measures which would immediately lower the standard of living, with the promise of a quick recovery [...]' (Lavigne 1995: 119). This speed of transition was chosen by Poland, that was in a situation of high inflation, large budget deficit and too high external debt. Hungary, however, chose the approach of gradualism, as on the one hand the communist power broke down before 1990 by internal divisions and its population was turned rather to a market than to a socialist economy. On the other hand, its new government was not able to agree on a clear-cut programme.