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In the early phase of transition, which began in the 1990s, Central and Eastern European countries (CEECs) pursued economic restructuring that involved massive injections of state support. With reference to the history of state aid in centrally planned economies, we investigate state aid practices of CEECs since attaining full EU membership. We analyse whether their state aid policies during and after transition challenged European state aid legislation, and whether these fit into the EU strategy of ‘less but better targeted aid’. The data-based analysis is complemented with some indicative insights from state aid in the steel industry as well as the financial service sector to suggest that there is today no significant difference in state aid law application between East and West any more – the new EU members have further caught up by better aligning to the objectives of the State Aid Action Plan.

Patients with seemingly the same tumour can respond very differently to treatment. There are strong, well-established effects of somatic mutations on drug efficacy, but there is at-most anecdotal evidence of a germline component to drug response. Here, we report a systematic survey of how inherited germline variants affect drug susceptibility in cancer cell lines. We develop a joint analysis approach that leverages both germline and somatic variants, before applying it to screening data from 993 cell lines and 265 drugs. Surprisingly, we find that the germline contribution to variation in drug susceptibility can be as large or larger than effects due to somatic mutations. Several of the associations identified have a direct relationship to the drug target. Finally, using 17-AAG response as an example, we show how germline effects in combination with transcriptomic data can be leveraged for improved patient stratification and to identify new markers for drug sensitivity., Little is known about the contribution of germline genetic variants to cancer drug sensitivity. Here, the authors devise an approach for joint analysis of germline variants and somatic mutations, identifying substantial germline contributions to variation in drug sensitivity.

Traditionally, research on FDI analyses bilateral country-level aggregate data on FDI flows (in much the same way as in the introduction). However, the empirical analysis of the technological role of FDI for economic development in host countries (technology transfer and spillover effects) usually uses the method of production function analysis, based on aggregate industry-level data on FDI stocks combined with estimates of inter-sectoral linkages derived from national-level input- output tables. Some production function analyses rely on firm-specific data using official databases or field work. The traditional method of analysis does not take firm heterogeneity into account, and hence remains unable to explain large fractions of the variance in resulting technological roles between the various FDI projects that exist in host countries. The latter is, however, typically restricted in its comparative strength, because the methodology behind the firm-specific databases varies between the different countries where such data is available. Moreover, official statistics seldom contain information about the most important determinants of the research issues at hand (determinants of the technological role), because they are typically not easily measured in hard facts, but rather involve subjective valuations of managers of firms to be considered in the analysis.

Before economies that are catching up in terms of technological development can feed the process of technical advance from their own indigenous resources, they will typically depend on the supply of technology from abroad, that is technological diffusion and imitation. FDI is the most important driver of supply of external technology. This is generally assumed for the newly industrialised countries in Asia and other emerging markets, and has also proven to be the case amongst some of the West European countries in their own processes of catching up (see for example Jungmittag, 2005). There is, however, a controversy about whether FDI has in fact had a benign effect for economic development or not. Even if the literature does on average agree that FDI has positively contributed to technological advance and economic growth (for comprehensive overviews see for example Moran et al., 2005; Rugman and Doh, 2008), many important qualifications can be found in the literature that are convincing and appear to be empirically robust. The final word on the developmental role of TNCs is hence not out yet, and may never be due to issues like heterogeneity and context-specificity.

Purpose – The main research question of this contribution is whether local market concentration influences R&D and innovation activities of foreign affiliates of transnational companies. Methodology/approach – We focus on transition economies and use discriminant function analysis to investigate differences in the innovation activity of foreign affiliates operating in concentrated markets, compared to firms operating in nonconcentrated markets. The database consists of the results of a questionnaire administered to a representative sample of foreign affiliates in a selection of five transition economies. Findings – We find that foreign affiliates in more concentrated markets, when compared to foreign affiliates in less concentrated markets, export more to their own foreign investor's network, do more basic and applied research, use more of the existing technology already incorporated in the products of their own foreign investor's network, do less process innovation, and acquire less knowledge from abroad. Research limitations/implications – The results may be specific to transition economies only. Practical implications – The main implications of these results are that host country market concentration stimulates intranetwork knowledge diffusion (with a risk of transfer pricing), while more intense competition stimulates knowledge creation (at least as far as process innovation is concerned) and knowledge absorption from outside the affiliates' own network. Policy makers should focus their support policies on companies in more competitive sectors, as they are more likely to transfer new technologies. Originality/value – It contributes to the literature on the relationship between market concentration and innovation, based on a unique survey database of foreign affiliates of transnational corporations operating in Eastern Europe.

In all PSEs facing the tasks of profound economic restructuring and catch-up development, the establishment of a functioning financial sector is of central importance for the emergence of a stable monetary constitution: unless the financial sector is able to offer credibility despite its inherent instabilities, and unless the institutions this sector is comprised of can fulfil their functions in the new system of economic control and governance, the most immediate obstacles to economic development cannot be removed.

In order to be able to give account of the relevance of the shifts in the regional structure of Hungary’s foreign trade with respect to its perspectives on economic growth (export-oriented development), the following section will outline the most important features of Hungary’s foreign trade during the CMEA era and describe in what direction it developed during the years of transformation. Regional co-operation in the form of a payments union (PU) and a free trade area is seen as a chance for economic growth and development. The concept of a ‘two-tier’ integration is the result of these advantages of regional cooperation and the concept of ‘outward orientation’. This chapter closes with an analysis of the effects of capital imports on catch-up development to conclude that, for Hungary, export surpluses, currency undervaluation and monetary stabilisation form the trinity of a successful process of catch-up development.

The analysis of Hungary’s ‘twin deficit problem’ (Erdos 1995) in 1993–94 serves in this book to highlight the effects of a violation of the monetary condition of catch-up development for a small and open transitional economy (economic policies which are conducive to the fulfilment of this overriding condition were illustrated in Figure 7.6). In light of the results drawn from the analysis into the constraints and pportunities of monetary stabilisation and integration with respect to economic development, it was not surprising (and indeed was inevitable) that the Hungarian policies of public expenditure well in excess of tax revenues (deficit spending), administered capital imports (rooted in the adherence to the ‘two-gap’ approach) and premature integration (effecting import substitution) gave rise to a severe destabilisation of Hungary’s monetary constitution.

Whereas the breaking-up of the monobank into a two-tier banking system was primarily aimed at establishing coherent institutional conditions for financial management and intermediation under a hard budget constraint, subsequent reforms were aimed at gradually exposing the Hungarian economy to (international) competition via integration: price and import liberalisation, as well as the reduction of all kinds of subsidies effected a gradual shift of the economy to the new price regime which was governed by the conditions of supply and demand on the world market. Inflation and exchange rate instability therefore became the most obvious and immediate fields of concern for economic reform policy.

The phrase, a ‘German model’, is adopted in the title although the existence of such a model is highly doubtful. The German economic post-war success story can be understood as a result of economic policy in a peculiar internal and external market constellation, whatever model is stylised (see Holscher 1994). This paper argues that the market constellations faded away, but economic policy remained as if nothing happened at all. The process of changing market constellations began in the early 1970s with the breakdown of the Bretton-Woods system of fixed exchange rates, continued with ‘eurosclerosis’ and stagnation in the 1980s, and found its preliminary last stage in the new constellation of a unified German economy. The obvious signal of the new constellation is the coincidence of a record export performance and mass unemployment, reaching figures comparable to the world economic crises of 1933.