Abstract
This paper uses binary choice model to examine the determinants of product and process innovation in three advanced economies in Central Eastern Europe (CEE): Czech Republic, Poland and Hungary. The paper is based on a Business Environment and Enterprise Performance Survey (BEEPS) conducted by European Bank for Reconstruction and Development (EBRD) in 2002 and 2005. Evidence supports Schumpeterian hypothesis that firm size has positive effect while firm age has negative effect on innovation. Foreign ownership, exporting status and organisational flexibility exert positive impact on firm innovation activities. Regarding, external conditions, we find that firms operating in concentrated market and face change in the identity of the main customers are more prone to innovation.
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