Introduction

For a long time, economic development in Central and Eastern European (CEE) countries has been seen by most analysts in both academic and policy circles as a largely positive if not a very positive story. For example, at the end of 2005, Business Week ran a cover story titled ‘Central Europe – Rise of a Powerhouse’. It has become commonplace to argue that the success of CEE development is mainly due to neo-liberal economic policies (liberalized markets, balanced public budget, price stability, low tax burden and strongly market-oriented reforms in all socio-economic sectors) pursued by these countries since the early 1990s. In other words, CEE countries have been poster countries for Washington Consensus policies. Indeed, as we show below, during the entire decade of the 1990s, industrial restructuring and embryonic innovation policies in CEE were largely dominated by Washington Consensus thinking. We aim to show that, first, these policies have been a double-edged sword: on the one hand enabling fast and furious industrial restructuring while, on the other hand, locking CEE economies into economic activities with low value added/productivity growth and thus undermining future sustainable growth. However, the impact of accession into the European Union (EU) has been equally pivotal for industrial restructuring and innovation policy making in CEE countries in the 2000s and this process can be summed up as a strong Europeanization of innovation policy in CEE. We aim to show, second, that Europeanization has been largely a double-edged sword for CEE countries. Since joining the EU in 2004 or 2007, and already during the accession process, there is a strong change in innovation policies in many CEE countries towards a much more active role of the state. In this change there is a clear and strong role of EU's structural funding, particularly the negotiations and planning that comes with it. However, these changes come with specific problems: first, there is an over-emphasis in emerging CEE innovation policies on a linear under-standing of innovation (from lab to market) that is based on the assumption that there is a growing demand from industry for R&D (which is not the case because of the structural changes that took place in the 1990s via the Washington Consensus policies); and, second, increasing usage of independent implementation agencies in an already weak administrative capacity environment lacking policy skills for networking and long-term planning.