Opere et Studio pro Oeconomia ___ __ No 1(3) The role of networks in stimulating innovation and catching-up in European enterprises: A literature review * RICHARD WOODWARD CASE – The Center for Social and Economic Research, Warsaw, Poland DENIZ EYLEM YORUK Science and Technology Policy Research (SPRU), University of Sussex, Brighton, UK MARIE BOHATA European Statistical Office (Eurostat), Luxembourg ANTONIO FONFRIA MESA Universidad de Complutense de Madrid, Spain MARY O’DONNELL University of Limerick, Ireland MAGDOLNA SASS Institute of Economics, Hungarian Academy of Sciences, Budapest, Hungary February 2005 Abstract We analyse the ways in which various actors affect changes in competitiveness at the firm level, focusing on the roles of external actors such as investors, creditors, customers, suppliers, universities, research institutes, local governments, etc., in their relationships with the firm; that is, with the effects of various kinds of networks on competitiveness. We begin by discussing the central analytical concepts, briefly reviewing the general literature on how networks affect enterprise performance generally and in the specific transition environment. We then overview the relevant literature on enterprise performance and its relation to various types of networks (with a special emphasis on the role of foreign investors) in three Central European and two West European cohesion countries (the Czech Republic, Hungary, Ireland, Poland and Spain) – countries which share a need to upgrade their industries with respect to the older member countries of the European Union. JEL code: D83, D85, F23, L14, O32 Keywords: networks, innovation, upgrading, CEECs, competitiveness. * This paper was prepared with support from the European Commission under the Fifth Framework Programme project entitled “Changes in Industrial Competitiveness as a Factor of Integration: Identifying Challenges of the Enlarged Single European Market” (Contract No. HPSE-CT- 2002-00148). 3