Challenges for European Innovation Policy

Challenges for European Innovation Policy

Cohesion and Excellence from a Schumpeterian Perspective

Edited by Slavo Radosevic and Anna Kaderabkova

This book uniquely applies the Schumpeterian innovation policy perspective to the countries of Central and Eastern Europe. A broadly defined framework of the science, technology, innovation and growth system underpins the empirical and conceptual analysis of the critical issues including demand, FDI, finance and education.

Chapter 3: Fostering Growth in CEE Countries: A Country-tailored Approach to Growth Policy

Philippe Aghion, Heike Harmgart and Natalia Weisshaar

Subjects: economics and finance, economics of innovation, evolutionary economics, innovation and technology, economics of innovation


Philippe Aghion, Heike Harmgart and Natalia Weisshaar 3.1 INTRODUCTION Transition countries, particularly those in Central and Eastern Europe (CEE), have embarked on strong and sustainable growth paths. This chapter provides a general framework for designing medium-term, growth-enhancing policies, while focusing on specific policies relating to competition, education and finance. Since the late 1980s the Washington Consensus has generally been the prevailing view about which policies are most conducive to good growth performance. This view asserts that, no matter what the country’s geographical location or current level of development, the appropriate policy package to achieve growth is to liberalize trade and competition, privatize state-owned firms and maintain a stable macroeconomic environment. In addition, the Consensus highlights the importance of property rights protection and enforcement of contracts as essential preconditions for entrepreneurship and growth to flourish. However, this view is beginning to be challenged. For example, it has been argued that countries in South-East Asia1 have grown rapidly since the 1970s without fully liberalizing trade, while China is making huge economic strides without privatizing its large state enterprises. A report commissioned by the World Bank, known as the Spence Report,2 puts forward policy recommendations that are more nuanced than the Washington Consensus and take account of the different circumstances of countries or regions. It emphasizes the common role of education, trade, competition and labour market mobility in fostering growth across a wide range of countries, and stresses the importance of government commitment to pursuing growth-enhancing policies in the long term. Policies...

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