Innovation, Company Co-operation and the Transformation Process in Eastern Europe

Economic theory addresses the scarcity of resources, in particular of physical and human capital, as the underlying reason for inertia in the transformation process in Eastern Europe. In contrast to theory, the empirical dynamics of their growth performance suggests that Central European Economies (CEE) economies have found alternative channels to foster economic growth. Authors suggest that co-operation between Western and Eastern European companies play a key role in understanding the CEE convergence process. Based on a genuinely adopted innovation driven endogenous growth model, expected effects of co-operation between companies in transforming and developed economies are analysed, finding that the opening of the economy and especially company co-operation of Eastern and Western European companies within identical market segments clearly lead to positive growth effects.