The project 'EU Integration and the Prospects for Catch-Up Development in CEECs - The Determinants of the Productivity Gap' was concerned with establishing knowledge about determinants of lower levels of productivity in the new member states of Central East Europe (CEE). This knowledge pertains to the most important determinants of aggregate (labour) productivities: sectoral structures of specialisation both in domestic production and in foreign trade; conditions within National Innovation Systems of CEECs; potentials for technology transfer via foreign direct investment in the regions; deficiencies of manufacturing firms in the new member states of Estonia, Poland, the Czech and Slovak Republics, Hungary and Slovenia. This knowledge is comparative in nature (between CEECs and with the EU). The project generated in particular two unique databases by way of field work, the 'CEE subsidiary database' focussed on the relationship between parent, subsidiary, and host economy, and the 'CEE firm-specific productivity determinants database' focussed on machinery, cosmetics, electrotechnical, and furniture manufacturers. The knowledge and databases were generated with a view on providing the necessary knowledge to devise economic policy both at national and EU levels to assist swift catching up of CEECs to West European productivity levels. The main findings of the project can be summarised in the following points: sectoral specialisation patterns explain some of the productivity gaps in the Slovak Republic, Hungary, and Poland; industrial sectors (i.e. a lower technological level in industry) are the most important sources of productivity gaps in all newly acceded countries; specialisation patterns in CEECs' manufacturing industries suggest very different potentials for future productivity growth rates (here, the best prospects are predicted for the Slovak Republic, Slovenia, and Hungary, the worst for Poland and Estonia); in foreign trade, a product-quality-cycle could be identified for vertical intra-industrial trade, where the EU exports products of higher quality and CEECs exports less sophisticated products (restricting catch-up but not technological upgrading); weaknesses in CEEC's national systems of innovation lie mainly in 'broad' (macro-institutional context of innovation) rather than 'narrow' (institutions involved in R&D) systems, and are barriers to future sustainable (i.e. technology-led) growth; whilst foreign direct investment plays an important role in technological development in CEECs, the existence of a variety of different kinds of subsidiaries in the region (with respect to the relationship between parent, subsidiary, and host economy) suggests very different potentials for technology transfer, with Hungary and the Slovak Republic containing the largest potentials (albeit due to different reasons), and Slovenia and Poland the lowest potentials; whilst social adaptive capabilities in CEECs in terms of technology transfer have not turned out to be a 15 critical problem (mainly because it was seriously addressed by foreign investors through training), the domestic firms (as e.g. suppliers) in CEECs are considered rather second and third-tier and hence cannot benefit to a large extent unless taken over by a foreign investor; at the firm-level, the most important determinants of lower productivity levels are related to management expertise, in particular networking and strategic planning, and investment intensities; in terms of economic policy, the results suggest that swift productivity catch-up is most efficiently assisted by a rather classical policy-mix of increasing competition (long tail of weak firms), increasing flexibility for intra and intersectoral migration, some form of support for investment, in particular into infrastructure, and (management) training programmes with a focus on marketing and strategic management in a modern competitive market economy.
