The University of Pécs has successfully completed a multi-year research program that examined the conditions under which domestic companies can play a greater role in Hungarian industry, how they can integrate more closely into international value chains, and what would make the Hungarian economy more resilient, more innovative, and capable of generating higher added value.
The program titled “Enhancing the Role of Domestic Companies in the Reindustrialization of the Nation” (program ID: TKP2021-NKTA-19) was a major research project of the Faculty of Economics at the University of Pécs. One of the central questions of the research, conducted within the framework of the National Research, Development, and Innovation Fund’s Thematic Excellence Program, was how to further develop industrial growth based on foreign working capital so that domestic enterprises can also benefit from it to an ever-greater extent. According to data from the NKFIH, the program received 1.289 billion forints in funding.
Based on the results published upon the project’s completion, one of the researchers’ most important findings is that the mere establishment of large foreign companies in Hungary is not sufficient for long-term economic convergence. It is at least as important to consider how deeply these companies integrate into the domestic economy, to what extent they rely on Hungarian suppliers, what knowledge and technology flows to local companies, and how much autonomy the subsidiaries operating in Hungary have in procurement and development decisions.
It’s not enough to bring investment here—it must also be integrated into the Hungarian economy
One particularly important conclusion of the research is that the actual economic development impact of foreign direct investment is strengthened when domestic supplier and knowledge networks also develop in the investment’s local environment.
In practice, this means that the value of a multinational company operating in Hungary is not determined solely by how many jobs it creates or how much production capacity it establishes in the country. In the long run, it is at least as important whether Hungarian companies are able to partner with it as suppliers, whether they can acquire the necessary technological, quality assurance, and organizational expertise, and whether they will later be able to perform increasingly complex tasks with higher added value.
This is supported by a recent study conducted as part of the project, which analyzed the supplier relationships of a German manufacturing company operating in Hungary. The study sought to determine what limits the deeper involvement of Hungarian suppliers: the technological and organizational readiness of domestic companies, or the fact that the Hungarian subsidiary of the multinational corporation lacks sufficient decision-making autonomy to bring in new local suppliers. According to the research, these two factors must be addressed together: both domestic SMEs prepared for supplier integration and adequate local corporate decision-making autonomy are necessary.
This also represents a significant shift in perspective from the standpoint of investment promotion. A successful investment does not end with the construction of the production facility. The next step is to foster the development of a local economic ecosystem around the investment, comprising suppliers, service providers, training institutions, research institutes, and innovation partners.
The flow of knowledge may be one of the most important economic benefits
Research at the University of Pécs places particular emphasis on the flow of knowledge. When a local business becomes a supplier to a large international corporation, it often does not simply receive a new order. It must meet stricter quality requirements, adopt new technologies, improve its production and management systems, and enhance its digitalization, logistics, or even its own research and development capabilities.
These changes could later provide a competitive advantage in other markets as well. Supplier collaboration can thus initiate a learning process that, over time, enables the domestic company to move beyond simply providing components or services and to take on more complex development and engineering tasks.
The goal, therefore, is to move “up the value chain”: to increase the share of research and development, design, engineering, digitization, and higher-level business services in Hungary relative to activities that are purely assembly-based or have lower added value.
Why does it matter how independent a local subsidiary is?
The research also drew attention to a less flashy but extremely important corporate governance issue: the degree of decision-making autonomy enjoyed by multinational subsidiaries operating in Hungary matters.
For example, if the decision on supplier selection rests solely with the foreign headquarters, the management of a Hungarian factory has little opportunity to involve local businesses, even if they would be technically suitable partners. With greater local autonomy, however, more opportunities may arise to develop supplier relationships, test local innovations, or even establish new R&D functions in Hungary.
Increasing companies’ domestic integration is therefore not merely a matter of SME development. It is also important that subsidiaries operating in Hungary assume increasingly senior positions within their international corporate groups and function not only as operational production units but also as independent centers of expertise, development, or decision-making.
It is also a key issue in terms of economic resilience
The research program period was marked by a series of economic shocks: a global pandemic, supply chain disruptions, an energy crisis, inflation, geopolitical conflicts, and rapid technological changes. These developments have highlighted the risks that can arise when an economy relies too heavily on a limited number of sectors, a few major players, or distant supply chains.
An important aspect of the University of Pécs’s research was therefore to explore how the adaptability and resilience of the Hungarian economy could be enhanced. A more stable domestic supplier base, an increase in the number of knowledge-intensive enterprises, technological advancement, and a more diversified economic structure could all play a decisive role in this regard.
From Baranya’s perspective, all of this is particularly relevant. In recent years, the county has seen simultaneous growth in high-value-added industry, university research and development, and innovation infrastructure. Further developing the connections between the University of Pécs’s research base, local businesses, industrial parks, the chamber of commerce, and the vocational training system can foster exactly the kind of regional collaborations that are being discussed in research circles nationwide.
International scientific findings have also been produced
The project’s scientific achievements are also significant. According to a press release from the University of Pécs, the research team achieved results that exceeded their original scientific goals; several of their studies have been published in prestigious international journals, and additional publications are in the works for leading professional journals. As a result of the program, a textbook addressing current issues in behavioral economics was published by Akadémiai Kiadó.
The research project is led by Prof. Dr. József Vörös, a research professor and professor emeritus at the University of Pécs (PTE) and a full member of the Hungarian Academy of Sciences. According to information from the Faculty of Economics at the University of Pécs, a new research project is already building on the results of this research program: the goal of this follow-up is to continue studies related to reindustrialization, expand research activities, and strengthen international scientific ties. According to the faculty, by the end of the previous program, the number of outstanding, Q1-category professional publications had doubled, and young researchers had participated in training programs at institutions including Harvard Business School, the MIT Sloan School of Management, and the London School of Economics, among others.
The Message of the Research for Companies and Economic Development
Perhaps the most important practical conclusion of the PTE project is that competitiveness does not stem from a single major investment or a single economic policy tool. Sustainable development requires a combination of foreign investment, strong domestic businesses, the flow of knowledge, innovation, and well-functioning supplier relationships.
One of the challenges in the coming period, therefore, may be how to establish as many local economic ties as possible around the large-scale corporate investments taking place in Hungary, and specifically in Baranya County. This requires identifying and developing potential suppliers, strengthening university-business partnerships, enhancing the technological and management capabilities of small and medium-sized enterprises (SMEs), and ensuring that investments coming to the region increasingly establish R&D, engineering, service, and decision-making functions locally.
The research conducted in Pécs thus contributes not only to the academic understanding of Hungary’s reindustrialization. It also seeks answers to practical questions that directly determine how much value a new investment leaves in the local economy, to what extent it strengthens Hungarian businesses, and how much it makes the regional economy more resilient.
Sources: University of Pécs project completion press release, University of Pécs Faculty of Economics, University of Pécs Project Database, National Office for Research, Development, and Innovation.
