Researching Innovative Capacity of Local Subsidiaries in Selected CEE Countries

The aim of the paper is to research the innovative capacities of local subsidiaries in selected CEE countries. We define innovative capacity as an ability of conducting innovation activities with innovation output variables i.e. innovation products and/or processes as the visible results of innovation inputs i.e. innovation investments. We found that the determinants of innovation input differ from the determinants of innovation output. The Innovation outputs variables are affected by productivity variables. On the other hand, local subsidiaries as a knowledge source for other unit of MNEs group as well as SMEs as a type of the ownership affect the innovation input determinants. However, similarities between innovation input and innovation output exist between business functions i.e. process engineering appear in both cases as determinants.The innovation performance measured by productivity are strongly reliant on local subsidiaries performance—changes in value in earning before interests and taxes, where investments into resources related to technologies are crucial i.e. differences in number of R&D employees between 2005 and 2002 and difference in the annual expenditure on R&D and innovation as a percentage of total sales positively influence local subsidiaries performance.