Competitive Capacity and Competitive Performance – Challenges for Technology and Skill Catch-Up in the Enlarged EU∗

Abstract: When achieving long-term sustainable growth, the key role is assigned to increasing and knowledge-based competitiveness. The new EU-entrants therefore face double challenge on the Lisbon road. On the one hand, higher expenditure is required to improve the quality of research and education input and infrastructure, on the other hand, the innovation system changes are necessary to increase efficiency of expended resources. At the same time, both supply and demand sides must be balanced adequately in policy supporting knowledge-based competitiveness. The example of the Czech Republic within EU-25, as to the export performance, productivity and R&D intensity of the so-called hi-tech activities, has been used to present a more detailed analysis of competitive advantage sources and challenges in the less developed EU-members. A major part of hi-tech production and export in new EU members comes from FDI affiliates. The analysis therefore emphasizes the criterion of (in)completeness of the multinational value chain, which continues to consist mainly of segments with lower quality intensity (assembly operations) in these countries. This aspect plays a crucial role in international comparison of competitiveness within EU-25, and in assessment of success and political support of transition to knowledge-based economy