Tibor Dőry

Innovation and excellence

Management methods for innovation transformation

Hungarian innovation challenges

Hungarians are a creative and resourceful people, and our researchers have made numerous world-renowned scientific discoveries, of which we can be justifiably proud. However, we are making only small steps in building technology companies, even though we occasionally read in the news about successful Hungarian startups, scientific achievements and discoveries. Despite significant publicity and even more significant venture capital investments, no "unicorn" worth at least a billion dollars has emerged in Hungary in the last 10-20 years. Domestic innovation spending is dominated by a few large listed companies (MOL, Richter and Telekom), with significant investments also being made by the German company Bosch and a number of other, typically foreign-owned automotive companies. There are undoubtedly successful and growing innovative domestic companies, but smaller companies typically do not have a systematically structured innovation system. According to some estimates, there are a few hundred companies that continuously implement innovation. Based on the Central Statistical Office's (KSH) broader interpretation of innovation, almost one in three (29.3%) Hungarian companies introduced some type of innovation between 2016 and 2018, i.e. at least one type of innovation over a three-year period, which falls into the category of new or significantly improved products, service and/or business process.1 The trend is improving, but the data do not yet show any signs of a breakthrough, and our innovation performance places us in the bottom third of the EU-27 member states. It is particularly thought-provoking that, according to Eurostat data, nearly three-quarters (73%) of Estonian companies and more than two-thirds of Belgian and German companies implement some kind of significant innovation over a three-year period.

If we try to understand the phenomenon and the possible underlying reasons from the input side, i.e. innovation expenditure, it becomes clear that there are differences in the composition of innovation expenditure between Hungarian and other Central and Eastern European enterprises, as well as between the "leading innovator" countries, such as Sweden, Finland and Denmark. In the former group, more than half of the expenditure considered to be for innovation purposes is on machinery, equipment and software, while expenditure on research and development within the organisation itself accounts for between 20 and 30 per cent, with the remainder going to finance projects carried out in partnership with, for example, universities and research institutes (NKFIH, 2020). Of course, Hungarian and other Central and Eastern European companies are at a historical disadvantage compared to Scandinavian and Western European companies with a developed innovation culture, but the contrast is too great. The machines and software used in research and development do play an important role in creating innovations, but perhaps even more expenditure, or rather investment, is involved in employing development engineers and other research and development staff, as well as involving other specialists who typically work in the university and research-institute sector.

In this context, it is interesting to consider more closely what factors actually play a decisive role in the overall economic performance and profits of companies. Katona (2021) examined the balance sheet data of Hungarian companies for the period 2007–2017 in a microeconomic analysis based on a corporate database. The research sought to determine the extent to which a company's own innovation and the dissemination of the knowledge gained from it affect the performance of domestic companies. One important finding of the research is that the ratio of companies' tangible assets to intangible assets showed an upward trend during the period under review. This means that Hungarian industrial companies tend to favour investments in tangible assets over investments in intangible assets. However, the comprehensive analysis also found that the innovation of the companies examined is one of the most important sources of improvement in corporate productivity. In theory, it has not been possible to demonstrate statistically significant evidence that the knowledge that can be acquired and learned from foreign-owned companies contributes to the growth of Hungarian companies' performance.

This conclusion is unfortunate, given that over the past two to three decades, numerous multinational companies have established themselves and achieved outstanding international success based on their production activities at their Hungarian sites. For some reason, however, the expected transfer of knowledge and know-how between Hungarian and foreign companies has not materialised. No scientific research has been conducted into this issue, or if it has, it has not received significant publicity, so we will suggest two possible reasons here:

there is no legal obligation or commitment that would require multinational companies to cooperate more intensively with Hungarian companies and universities. In contrast, Chinese and Far Eastern governments specify to companies settling in their countries what partners they should cooperate with and what the results of such cooperation should be;
there is a perceived dividing line among domestic employees that limits movement between foreign-owned and domestic companies, and the exchange of "tacit knowledge" that would naturally accompany an employee's change of job simply does not take place. There are countless examples of this among high-tech companies operating in the famous Silicon Valley, but also in other innovation hubs around the world. There are also numerous advantages at the macro level if employers, while complying with competition restrictions, lure employees from one technology company to another, whether they are employees of newly launched startups or European or Asian companies.

If the findings of the research are true, i.e. that the innovative activities of companies have a significant impact on their performance and competitiveness, then why do Hungarian companies, especially small and medium-sized enterprises, not devote more attention and resources to financing their innovative activities? Could it be that the attention of company managers and owners is absorbed by numerous other management issues, leaving no room for innovation? Is there sufficient motivation and ambition on the part of managers and owners to introduce something new to the market, or are they content with improving their existing processes and developing ways to increase efficiency?

1	Business process innovation is a broader category that has been used since 2018 and includes production processes: ICT, i.e. information technology, marketing and business development, and various management developments.

Tartalomjegyzék

Kiadó: Akadémiai Kiadó

Online megjelenés éve: 2026

ISBN: 978 963 664 182 5

Menedzsment

The aim of the book "Innovation and Excellence" is to inspire and encourage company leaders, managers, and experts to initiate and implement innovation transformations with the help of professional literature and corporate case studies. Another important goal is to help develop the innovation capabilities of small and medium-sized enterprises in particular by sharing simple, proven management methods that can be tested in practice.

The first part of the volume reviews the factors of corporate excellence and success, then highlights the possible sources of innovation, with a focus on the role of users and employees. The empirical section presents a detailed description of the supportive role of the workplace environment and creative working conditions based on corporate case studies (AUDI, BOSCH, MELECS). The volume concludes with a description of selected tested practical methods and management techniques that readers can try out in their own businesses.

Hivatkozás: https://mersz.hu/dory-innovation-and-excellence//

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