Budapest: Central and Eastern
Europe’s innovation hub?
by Péter Csárdás
A number
of books and scientific articles deal with the evolution and functioning
mechanism of clusters, but they fail to give a general definition which
encompasses all aspects of these unique institutions. They agree however that a
cluster is a great number of actors which operate closely together which grasps
the essence of them: you know it when you see it. After the bust of Zsámbék,
the „Hungarian Silicon Valley” whose story was discussed in this blog earlier,
it makes sense to have a closer a look on a rather success story next door,
namely the evolution of Budapest as an ideal location for IT giants as well as
innovative tech start ups.
It all
started in 1999 when the first building of Infopark was opened. The government
and the private sector had a number of plans concerning the area between Petőfi
and the then constructed Lágymányosi Bridge on both side of the river, and the
establishment of the office park played a key role in the further development.
In 2001 the new campus of Eötvös Loránd University (ELTE) was finished which
together with the adjacent buildings of Budapest University of Technology (BME)
formed a new center of scientific education in the Hungarian capital.
These all
fit well the seven determinants of a cluster: (1) it is spatially concentrated
since the now eight towers of the park and the university campus are in walking
distance from each other; (2) it is specialized, primarily for IT,
telecommunication and software development companies. The cluster has diverse
participants besides multinationals (3), including two universities, venture –
capital companies, and now it hosts the European Institute of Innovation and
Technology, an EU agency that was established in 2008 and choose Budapest for
headquarter because of its leading role in innovation in the region.
Furthermore, the participants compete and cooperate (4) with each other and now
created a critical mass (5) of interests and ideas for the long run (6). Lastly,
there is no doubt that residing institutions are active proponents of
innovation (7). The success of Infopark led to the construction of two other
entities: Science Park Budapest, an office park directly next Infopark, with
Ericsson and Tata as its flagship research renters, and Graphisoft Park which
offers research and development facilities and office spaces for Microsoft,
SAP, Graphisoft, and other smaller innovative companies. A positive
externality of the Budapest based R&D ventures is the boom of internationally
acclaimed start ups which started their career in the city. Talented and
well-educated people, who do not lack entrepreneurial spirit, have the chance
to go big. Prezi and Ustream are just two examples of two ventures whose
products are used by millions around the world.
In
the location choice of the developers and the residing entities was most
probably affected by a number of key factors. Innovation and technological
education have had long history in Hungary which have been hurt partially
during communist time, but gained momentum after the collapse the Iron Curtain,
and they both have high potential in hand with talented youth. The country has
a favorable location for multinationals and it has relatively cheap and well
trained labor market. The actual government always has some kind of strategic
plan about R&D, but the precious efforts sometimes lead to unwanted results
(see the Zsámbék case).
Currently the
revised New Széchenyi Plan deal with the issue of innovation and sustainability
that wants to achieve “competitiveness”, “jobs higher value added” and “sustainable
economic and social development”. Furthermore it even specifies quantitative
targets, namely to spend 1,5% of GDP on innovation by 2015, and 2% by 2020. The
government can provide direct cash subsidy, tax allowance, training subsidy and
job creation subsidy to achieve these goals. Despite of the ambitious plans
private sector remains a key factor of the organizational and financial
processes which hopefully can lead to the expansion of the now existing parks,
and attract more innovative companies.
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