Dynamics of Technology Upgrading of the Central and East European Countries in a Comparative Perspective: Analysis Based on Patent Data

This working paper explores patterns of technology upgrading as a three-dimensional process which consists of (i) intensity of technology upgrading, (ii) structural change, and (iii) interaction with the global economy. The specificity of our report is that we depict patterns of technology upgrading by relying entirely on patent data. We derive patent indicators to capture the three dimensions. Patent indicators for intensity of technology upgrading trace technological capabilities at the technology frontier (transnational patents) and behind the technology frontier (domestic/resident direct applications to national offices). Structural change in technological knowledge is depicted by the share of transnational patent applications in high technology fields and knowledge-intensive activities and by calculating a technological diversification index. To capture interaction with global economy in the upgrading process indicators measure technological knowledge sourcing across countries and interactions between foreign and indigenous actors. Based on 7 patent indicators covering the three upgrading dimensions the comparative analysis focuses on EU27 and its subregions and on the BRICS countries. According to the results, in 2011 CEECs were quite homogenous in their upgrading paths. A typical CEE economy in 2011 is well behind EU12 in terms of frontier technology intensity, domestic technology intensity, share of high tech patents and technology sourcing abroad. Moreover, its organizational capabilities are often less advanced. The CEE profile is much less coherent in terms of technology diversification/specialization and share of joint inventions. However, differences among CEECs are not significant. Still there are some notable national features. Poland, Romania and Slovenia have above average domestic technological intensity which reflects partly their sizes (Romania and Poland) and specific model of innovation system reliant on domestic R&D intensive firms (Slovenia). Latvia and Lithuania are specific in terms of high share of HTKI patents. CEE technology upgrading as depicted by patents is within the BRIC pattern (with exception of China which in terms of technology upgrading has de facto delinked from BRICS). In the BRIC context, the CEE characterize very open innovation system with a high share of coinventions and foreign actors exploiting local inventions. This reveals weak organizational capabilities to commercialize its own inventions. According to the results CEE grew during 1990s/2008 based on production, not technological capability. Their future growth will increasingly depend on building technological capabilities at world frontier level. Our analysis shows that the basis for such growth exists only to a limited extent and that speed of upgrading towards world frontier activities is well beyond required for catching up. Equally, our analysis shows that solutions for improved technology upgrading will need to be found with their existing innovation model of small open economies integrated into the EU.