Determinants of Innovation Activities: Public Financing and Cooperation: Case Study of Czech Republic and Hungary

Innovation represents one of the key factors in achieving competitive advantage of companies, hence the whole economies. Therefore, managers aim to acquire knowledge. Likewise public policy makers understand an importance of creating innovations and thus promote the generation and spread of positive effects through knowledge diffusion. In the context of modern innovation, the science-industry collaboration comes into its importance. Many foreign studies pointing to the fact, that this cooperation cannot be successful in each sector and that not every kind of innovation depends on the same knowledge flows. Therefore, we can notice inefficient attempts to cooperate in a number of cases, which are frequently accompanied by excessive use of national and European funds. The article aims to compare situation of companies in manufacturing industry in the Czech Republic and Hungary to analyze how is their growth of total turnover affected by (i) implementation of innovation (product and process); (ii) university-industry and government-industry collaboration; (iii) provision of public subsidies (national and European). We show, by using the multiple linear regression models, that cooperation with universities and with other enterprises within enterprise groups positively influences innovation activities. The results also show that public funds are more effectively provided in Hungary, more specifically the European funds. We provide comparison between Czech and Hungarian manufacturing industries and proposals how to improve the efficiency of national funds provision, which is not sufficient in these countries.