A scientific-technological revolution, foreseen under socialism, is becoming a reality under capitalism. Of course, this is neither Adam Smith’s nor Karl Marx’s capitalism but rather a non-laissez-faire version with a significant role for the state in innovation as well as macroeconomic policy-making. A more fitful transition is underway in the former socialist countries as they import organisational formats and adapt previous experience to renovate their industries. Local innovations in encouraging industry to become an active participant, rather than a passive recipient, in the innovation process need to be bench-marked.

Models from other countries to bridge the technology transfer gap between universities, research institutes and industries should be analyzed as they are inserted into local conditions. Blockages to the use of indigenous R&D capabilities in the post-socialist countries, and attempts to overcome these difficulties, need to be assessed in a comparative framework.

A series of experiments are underway in different post-socialist countries, starting from various standpoints, even given the common substrate of the former S&T model. Estonia has shifted its academy resources into the universities, selecting among scientists to emphasize the development of careers for young researchers. Bulgaria is keeping most of its academy institutes in place but shifting the balance within them from “basic” to “applied” research. In the Czech and Slovak Republics the Academies have been radically decentralized and slimmed down while the industrial research institutes became mostly subject to mass privatization. East Germany, of course, has been subsumed into the former West German system but, even so, hidden capacities and human resources from the previous era influence the future. In both Hungary and Bulgaria, a post- socialist science park model is being created, transforming former technological institutes into a network of small firms with brokering capabilities to link them to sources of contracts and market opportunities abroad.

Nevertheless, significant disjunctures between R&D providers and potential users persist from the socialist to post-socialist eras in Central and Eastern Europe and the FSU. A similar problem can be identified in the US and Western Europe. For example, the growth of central laboratories isolated from the operating divisions of firms parallels the Branch Institutes separated from production units. In this essay, we set forth the structural dilemmas that inhibit the possibilities for technology transfer, especially in the transitive countries. Next, we address the regulatory framework of technology, the technological crisis of CEE industries, and the impact of structural dependencies. Finally, we debate the potential for mobilisation of competitive opportunities and the reform of regulatory frameworks.

Contradictions Between Capabilities and Outcomes

Transition is well underway in the West but is less evident in the East. With a few notable exceptions, the R&D formats of the past are still largely in place, often subsidized by the West. In recent years, western hierarchical corporate structures have been flattened in the face of competitive pressures. There has been a corresponding shift to rely on lateral relations within and without the firm. This involves accessing R&D from other firms, universities and government laboratories as well as joint ventures in a variety of areas, including R&D. A new profession of technology transfer has emerged, with its practitioners located on both sides of the equation.

The so-called “catching up” countries of Eastern and Central Europe and the former Soviet Union face a dilemma. They inherited highly developed human capital resources, produced by the former socialist system that often find little use in the new era. These countries experienced a mismatch between scientific and technological capabilities and industrial development during the Socialist period, when they were able to take little advantage of these resources for civilian technological innovation. Under socialism, the goal was quantitative production. Without competition there was little need to innovate and therefore only formal use was made of an extensive technological support structures in branch and academy institutes.

In the post-socialist era, these countries experienced much the same dilemma but for different reasons. Transfer of embodied technology from abroad and foreign direct investment (FDI) alike, make little use of local R&D capacities and capabilities. In the post-socialist era, enterprises that reform themselves upgrade their products and modernise their production facilities prefer the easier way of purchasing ready made packages of technology from abroad rather than investing in an-house R&D facility or contracting for R&D locally. They then compete on the basis of lower prices and knowledge of the local market even as foreign companies establish new production facilities or modernize existing ones, primarily relying on imported technologies.

Under such conditions, there is little need to call upon domestic science and technology resources. How to resolve this contradiction between the existence of significant local R&D resources and lack of demand for it is one of the key issues of science, technology and innovation policy in Central and Eastern Europe and the FSU. At the same time there is a strong demand for the human capital that these countries have built up, especially in software programming skills, that pulls their nationals abroad. There is a contradiction between capabilities and their utilization at home and abroad. This contradiction manifests itself in the relationship between domestic and foreign firms operating in the domestic market. The great difference in salaries between the jobs in the domestic and foreign firms has been draining qualified manpower from the domestic firms - including R&D institutes - to the jobs in the foreign firms, even though the latter mostly require lower levels of qualifications.

The Gap Between General Reform and an Effective Innovation Policy

The very capabilities that spur the developments of the advanced western countries: the accumulated scientific knowledge is the crucial sources of the technology, which in turn forms the base of economic growth and social welfare does not yet work to this end in the so-called countries in transition. The comparatively extensive science and education capacities which the transitive countries inherited from the old regime raise the issue of mobilisation of science towards the economic and political aims of reform. However, political and economic reform, by itself, does not necessarily point the way to a useful innovation strategy for the post-socialist countries.

How can the activities of the academic and industrial science institutions be harmonized? Experiments with this issue (privatisation of the industrial science in the Czech Republic, Zoltan Bay institutes in Hungary, formations of science parks etc.) suggest that the core of the issue rests with the factors of wider social environment - industry, its motivation and capabilities to innovations, and the government with its awareness, readiness and capability to identify, promote and regulate the innovative changes in the environment of competing public interests. Moreover, the post-socialist countries, having rapidly liberalized their domestic markets, have entered the world markets with their differential segmentation and globalizing trends, challenging domestic industries, governments and public opinions.

The Challenge of Transition

Technology transfer is of great importance to the renovation of industry. Since the CEE countries are changing their institutional and regulatory framework from the closed arrangement to the open (market-based and democratic) one - the role of technology transfer is conditioned by the changes in the industrial, economic and institutional environments. The potential utilization of “the push effects” depends on creating a pull from the economic and social environment.

Only in the environment of a responsive and effective pull environment, including both the (top- down) regulatory measures and the effective bottom-up responses of market and democratic institutions can push effects can be utilized. The weakness of the responsive institutional measures of the CEE countries may call forth economic and socio-political threats. For these reasons well- framed regulatory measures are of great importance. These include identifying push effects such as opportunities for foreign technology and capital transfer, the economic impact of the domestic industrial structures and actors and promoting pull effects such as opportunities for the mobilisation of domestic industries and economic actors towards an acceptable industrial policy.

The tensions between nationally based institutions and globalizing trends with respect to technology and capital push do not only concern the transitive economies or any other late comers from the periphery of the world economic systems. They represent a global problem of modern societies. The experience of the advanced countries, even if they enjoy the advantages of the evolutionary development of democracy suggests that institutional changes are inherent features of all societies in the environment of the radicalised modernity. Thus, the functions of economic institutions, even if they are self evident, are subject to continual re-consideration and re- construction.

There has been a shift from linear to reverse linear models and dual complementary modes. For long time in the post-war period the general industrial trend was accepted that the main resource of technology is derived from the sciences. Later, attention was paid to the alternative concepts of technology which stressed that resources of technology are shaped in its interaction to economy, social structure and culture. Economists are aware of this issue from the debates about science push versus market pull. Similar cycles of debates followed after the great industrial breakthroughs, when some blocs of scientific knowledge found wider industrial applications, or the actors of the radicalized social upheavals and disturbances expected quick scientific solutions, or technological fixes for pressing social tensions.

Technology and its regulatory framework

The science and technology interaction in the advanced nations may be instructive for the CEE countries. This experience suggests that the transition and its various competitive/cooperative, private/public forms, have not been the outcome of an internal or formal shifts only but are greatly dependent upon a meta cultural (civilisation related) discursive background. The difference between episteme (know why) and techne (know how) is embedded in the modern (western) valuation pattern. Therefore, the question “either science or technology” (push or pull) should be abandoned and replaced by the issue - “science and technology”, or more specifically “what way and form of mediation between them can be feasible and prospective”.

Moreover, a meta-issue is always present in debates about S&T: is technology transfer (TT) a good or bad thing? While in the traditional approach the diffusion of the outcome was understood as the doubtless mean of progress, the present approach submits technology to democratic debate. In this way the ideological debate about good or bad technology is transferred into the more specific level of the discussion and assessment of the social impacts of technology, and the ways to orient it to meet social and human needs.

The formation of a modern regulatory S&T system, including the self- regulation of science, economic and social embedding of technology, and direct or indirect promotion of their active relationship - has followed a learning (evolutionary) path in the advanced western countries. First, at the end of the 60s, after the limits of economic growth were identified (together with pressure of the oil crisis), a response was sought in the internal developments of technology by experts through technological forecasting.

The limits of this approach was soon recognized and attention turned to the assessment of the social impacts of technology (TA). TA practices helped avoid negative social consequences of technology, improve the orientation of technology actors, raise public insight into the issues of technology. The need for better insight into the growth and socio-cultural embedding of technology, its internal developments, seems to be emerging as the most pressing issue. New forms and ways for its promotion are searched for, like the practices of technology foresight, parliamentary ethical commissions, international governmental and non-governmental conferences on global problems.

The autonomy of S&T institutions has been re-shaped. The above learning process has resulted in the development of regulatory techniques and forms for the public control of technology has followed a specific route and stages. First, the experts learnt to transcend their specialized fields and identify internal opportunities of technology. Next, TA practices helped establish interaction between the experts and lay public since the socio-economic impacts couldn’t be arrived at merely by better communication among the experts. Ideally, foresight is based on the responsiveness of the experts to social issues and the better insight of the lay public into S&T affairs. Such experiences have led not only to the improvement of regulatory practices but also affected the S&T institutions - academic research and education, competitive market practices and their public regulation, the coordinate capacities of ministries and administrative bodies.

Technology transfer and institutional gaps

Taking into account the above S&T institutional framework the issues of technology transfer in the CEE countries should be assessed by both the level of technology and the institutional & regulatory framework, and its gaps to the advanced countries. In the general terms the former issue can be indicated e.g., by the fact that the factor productivity is at the level of 30-50% of the advanced countries, and the latter one by the fact of the prevailing vertical and top-down relations (and weak horizontal and bottom-up ones). This regulatory environment constrained not only the emergence, diffusion and economic impact of innovations, as already mentioned above, but also the cultivation of the interfaces among the S&T actors (disciplines), their awarness of social issues as well as the public awareness of S&T role which are so important for the identification and social control of negative and risky impacts of technology. The existing lags in the level of technology and the institutional capacities influence the transformative efforts as structural barriers and constrain the intended changes.

Of course, the technological and institutional situation is differentiated by country and manufacturing branch related factors. There are competitive manufacturing branches and product groups with minimum technology lags, or lags which can be overcome by modest resources. Also regulatory practices and their coordinative capacities as well as the responsive, or stimulative, bottom-up activities have different levels of organising, learning and communicative capacities.

The search for a regulatory framework to promote TT is affected by both types of lags, and the threats that (i) the technological lag will be “fixed” by the inefficient institutional framework (pull of industrial path dependency) or (ii) that the transformative ambitions (in the rapid change of institutions) do not positively affect the industrial restructuration and are losing a support in the corresponding technological shifts (what is felt, for example, in the Czech situation due to the mass privatisation). The awareness of both threats and search for regulatory measures which would constrain the growth of the industrial branches with low value added content (even if with a short term returns on the base of comparative advantage in low social costs) and promote (post-) industrial branches with higher value added content seem to be a proper guiding framework for the promotion and regulation of TT.

Opportunities for industrial reconstruction

The reflection of the role of TT and its problems in the CEE countries is influenced by the experience with its most powerful channels: (i) foreign capital transfers, and (ii) mobilisation of the domestic S&T resources towards the industrial recovery. The former issue is related to the problems of the monetary and legal stability and the effective stimulations of the foreign investors since the recovery of the domestic industry is constrained by the lack of capital. The latter issue and its problems are seen in the inadequate assessment, regulation and funding of this or that element of the chain from the academy to the industry, even if more profound reasons may rest with inadequate balancing of the emerging private business sector and the public sector which is transformed from the etatistic to more democratic environment.

The CEE countries - in their efforts to join the EU countries - lack some structural and institutional capacities to promote technological development and control its impact. Of course, the experience of the advanced countries can not be taken as the guideline for action since the CEE countries are challenged by different institutional environment: they have to change the basic institutional framework, and to mobilise S&T in favour of their industrial modernisation at the same time while the advanced countries merely have to deal with “fine tuning” of regulatory issues rather than putting an entire system into place.

Western experience should be adapted at the level of the structural framework. The questions of which type of regulatory measures should be promoted, which should be avoided and what risks are bound with the promotion of this or that institutional arrangement etc. should be addressed. What can be learnt from the common experience is the fact that the de-etatisation, privatisation and formation of the democratic public sector are important but not sufficient conditions for the promotion and control of S&T.

So far, the role and the impact of the foreign TT is mostly limited to narrow scope of technology and the locality of its application. Foreign production capacities are transferred to a production site or some domestic companies sub-contract production for foreign companies. S&T actors are seldom mobilised to introduce domestic industries into international technological networks. Nevertheless, there are hopeful signs such as the emergence of consulting firms to assist local enterprises, building upon informal relations among institutional sectors during the Socialist era.

On the other hand, domestic TT has thus far been constrained by the traditional institutional setting i.e. concentration of scientists in universities and Academies and weak capacities in industrial science. The traditional approach to technology has been as applied science rather than recognizing its direct industrial role. Weak administrative and regulatory experience in the coordinating S&T institutions is also a problem. Domestic TT is diffused, weak in the innovative role of industries and lacking in orientation to prospective technological trajectories.

Finding creative ways to utilize exisitng resources, such as by transforming R&D institutions into a network of filial firms rather than discarding them wholesale, is the first step of a sensitive S&T policy. The next step of how to stimulate local and foreign industry to access these actual and potential resources is the fundamental issue of this conference and of CEE S&T and innovation policy.

NOTE

1. Theme paper for the NATO Advanced Research Workshop (ARW) on Industry As A Stimulator of Technology Transfer, which will be held 18-20 March at the University of Bialystock, Bialystock, Poland..

author’s (Henry Etzkowitz) address: spi@interport.net