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AbstractHungary provides an example of the change at macro and micro levels that is ongoing in the former communist bloc countries of Central Europe.This article shows how the structure of the economy changed over the period 1989–1993.Provides evidence of the shrinking domestic market and decline in industrial performance.Offers research on the factors that binder Hungarian companies from increasing production.Gives a view of actions that have to be taken to improve competitiveness.

In 1999, with OMFB (OMFB is the Hungarian abbreviation for `National Committee for Technological Development´, which was an independent government organisation promoting innovations. In 2000, it was subordinated to the Ministry of Education and given a new name (State Secretariat for Research and Development)). support, GKI Co. studied the knowledge flow that corresponded to 17 innovations. In 2000, there was a similar research launched at the Budapest University of Technology and Economics (TUB) and 42 university R and D cases were analysed. This article compares the most important experiences of the two investigations. The Hungarian knowledge flow between the economic actors is not intensive enough, and this deficiency was explored by both researches. The results of comparison and conclusions for innovation and technology policy makers are summarised in this article.