The Effects of FDI on Innovation Systems in Hungarian Regions: Where is the Synergy Generated?

Regional Statistics, 2015, Vol 5, No 1: 3-24

22 Pages Posted: 25 Sep 2015 Last revised: 26 Sep 2015

See all articles by Balázs Lengyel

Balázs Lengyel

Hungarian Academy of Sciences (HAS) - Institute of Economics CERS-HAS (IEHAS); International Business School - Budapest (IBS)

Loet Leydesdorff

University of Amsterdam - Amsterdam School of Communication Research (ASCoR)

Date Written: September 25, 2015

Abstract

In this study, we show how internationalization and foreign-owned firms influence synergies in the regional innovation systems of Hungary. We first distinguish three innovation system functions (knowledge exploitation, knowledge exploration, and organizational control) operating in regions and study their interactions using entropy statistics. The functions and their interactions are measured by analysing the distribution of firms in terms of geographical location, organizational size (number of employees), technologies (NACE codes of the OECD), and ownership (foreign versus domestic share in registered stock) in the 2005. Synergy is defined as mutual information among the three dimensions; a fourth dimension is added in order to bring internationalization (FDI) into the model. The factor is relevant since the four-dimensional model explains the GDP contributions to regional development in Hungary, whereas the three-dimensional model does not. We find that regional innovation systems in Hungary are self-organized differently, in relation to a relatively small number of foreign firms. These firms have a large positive effect on synergy in regions between the Hungarian capital and the Austrian border. However, FDI has negative effects on domestic synergy in the lagging eastern and southern provinces of the country.

Keywords: regional innovation systems, innovation system function, synergy, entropy, foreign firms

Suggested Citation

Lengyel, Balázs and Leydesdorff, Loet, The Effects of FDI on Innovation Systems in Hungarian Regions: Where is the Synergy Generated? (September 25, 2015). Regional Statistics, 2015, Vol 5, No 1: 3-24, Available at SSRN: https://ssrn.com/abstract=2665531 or http://dx.doi.org/10.2139/ssrn.2665531

Balázs Lengyel (Contact Author)

Hungarian Academy of Sciences (HAS) - Institute of Economics CERS-HAS (IEHAS) ( email )

Budaorsi ut 45
Budapest, 1112
Hungary

International Business School - Budapest (IBS) ( email )

Záhony utca 7.
Budapest, 1031
Hungary

Loet Leydesdorff

University of Amsterdam - Amsterdam School of Communication Research (ASCoR) ( email )

PO Box 15793
Amsterdam, 1001 NG
Netherlands

HOME PAGE: http://www.leydesdorff.net

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