1. A Paradigm Shift in Eastern
Europe: Moving Towards a
Knowledge-based Economy
Team Name: Paragon
Team Member/Leader: James Yan
Massachusetts, USA
Harvard University Extension School

2. Advantages and Disadvantages of EE
Economic Environment
Main Advantages:
a) A bridge linking
Western Europe with
emerging economies in
Asia (China and India)
b) Cultural affinity with
the West
c) Skilled, multilingual
labor force, low cost
labor compared to W.E.
Main disadvantages:
a) Risk of excessive
bureaucracy and
corruption
b) Often unpredictable
+5 strong advantage; -5 strong disadvantage legal framework
Source: Roland Berger CEE 2020 study; World Economic Forum (WEF)
http://www.jac-conference.org/jac/system/application/views/images_ce/RB_CEE.pdf

3. Characteristics of EE Countries
• High share of exports to GDP – however, the
Eurozone crisis significantly dampened demand
for EE exports
• High stocks of FDI brought in new technology
and contributed to enormous productivity gains,
although productivity levels are still lower than
in W.E. countries
• Human capital bottleneck: demographic ageing
and brain drain to W.E. and N. America
• EE economies forecasted to grow about 2
percentage points above W.E. levels in the next
decade
• Rapidly rising disposable incomes
• EE countries are more fiscally prudent than W.E.
countries (lower debt-to-GDP ratios)
• EE countries excel in the industrial sector
(secondary sector)
• Future: There must be a shift from efficiency-
driven economies to innovation-driven
economies, a higher share of employment in
According to the graph, the Czech Republic, Slovakia, high-tech sectors should be the new driver of
Poland, and Hungary are the frontrunners in terms of economic growth
competitiveness.
Source: Erste Group Research, World Bank
www.erstegroup.com/en/Downloads/0901481b800f4c21.pdf

4. Highlights of Interviews/Discussions
Reponses from Interviews Correlate with European Commission’s “Europe
“Over the next decade, Eastern European
2020 Strategy”
countries must move from a classical
catching up by imitation to a knowledge-
based system; pure cost competitiveness Europe 2020 Strategy prioritizes education and research among EU countries:
is not enough – in the long run, as costs Goal #1: EU target for R&D spending is 3% of national GDP
gradually rise, endogenous (internal) Goal #2: EU target for people aged 30 to 34 having enjoyed tertiary education is
sources of innovation will become 40%
paramount” – Birgit Niessner, Chief
Analyst at Erste Group Unfortunately, EE countries that are EU members still have some catch-up to do
before they fully transition into knowledge-based economies, as revealed by
“In the next decade, greater investments the graph below.
in education and R&D are needed to
promote innovation-driven economies in
Eastern Europe” – Marko Derca, Senior
Consultant, AT Kearney
“The number of university graduates
must increase significantly before we
can fully become a knowledge-based,
innovation-driven economy” – Wojciech,
my friend, student at Jagiellonian
University in Krakow, Poland
Source: Eurostat

5. What are the future economic
prospects of EE?
• Emergence and consolidation of high-tech industries
• Renewable energy and utilities, IT and telecoms,
pharmaceuticals and healthcare; most wanted profession
in 2022 will be in these industries
• Promotion of tertiary education, greater market
competition, and the growing availability of venture
capital will encourage entrepreneurial spirit and a
dramatic increase in start-up businesses – a good
environment for SME’s (small and medium-sized
enterprises)
• EE will escape the bind between the West and the Far East
by generating endogenous sources of innovation – as a
result EE will become less dependent on exports to W.E.,
EE will also be more competitive than the predominantly
efficiency-driven economies of the Far East

6. Vision of a Future Company in EE: e-Mobility
(specialized Electric Vehicle maker)
What is e-Mobility (sustainable mobility)?
- a nascent greentech industry, refers to vehicles powered fully or partially
by electricity
Why e-Mobility?
- Greentech/energy sector projected to grow rapidly in EE, one of
tomorrow’s major business opportunities, reflects the trend towards
greater innovation
- Electric vehicle (EV) market expected to grow at a phenomenal 151% over
2011-2017 in EE (Source: Frost & Sullivan consulting, 2012 )
- Highest growth expected after 2015
- Due to high volatility of oil prices, governments want to reduce
dependence on foreign oil
- Benefit from first-mover advantage in a promising market
- Rising personal incomes and an increasingly well-educated and
environmentally conscious consumer base demand greener vehicles

7. E-Mobility: A threefold analysis
1. Demand for EV’s: since EV’s are a relatively new concept in EE, the
company must generate consumer demand by promoting high
public awareness (holding trade shows, organizing international
conferences, publication of materials via mass media)
2. Supply: numerous pilot projects must be launched with EV test
fleets and an extensive charging station network (strategic
partnership with utility company that provides charging
infrastructure); long-term goal is to mass produce and boost sales
3. Role of government/municipalities:
Monetary incentives: provide grants and tax credits for the production
of EV’s, provide subsidies for EV buyers
Non-monetary incentives: preferential parking for EV’s, special lane
access

8. Company Analysis
Why is the company important/unique?
- Creates positive externalities: reduction in oil dependency/enhancing
energy security, reduction in CO2 emissions, improvement in air quality,
noise reduction
- Creates spin-off industries: new companies provide charging
infrastructure, thereby supporting greater employment
Which sectors within the company will be the most important?
- R&D (as the primary means of generating technological know-how),
Marketing (a pull strategy to create buyer demand)
What is the size and structure?
- Medium-sized company funded by venture capital and/or government
grants (the latter case would constitute a public-private partnership (PPP))
- use of cross-functional work teams (employees from manufacturing,
distribution, R&D, etc. all work together to find the optimal strategy, thus
reducing the time needed to get a product from the idea stage to the
marketplace)

9. Preferred Location of Company:
Poland
Out of all the EE countries,
Why Poland? Number of Cities over
- Large Domestic Market: 100,000 inhabitants
Population of almost 40 45
million, relatively high per 40
capita GDP 35
30
- High Consumer 25
Awareness of EV’s 20
15 Number of
- Stable Macroeconomic Cities over
10
Environment 5 100,000
- Greatest number of cities 0 inhabitants
over 100,000 inhabitants
(an indicator of market
demand)
Source: Independent Research

10. Timeline of Future Vision
2013-2015: build awareness among the public, attract the first
EV buyers, gather technological know-how, implement pilot
projects and alter strategy based on test results
2016-2020: roll out charging station infrastructure, establish
mass customer base, increased competition necessitates
product differentiation and unique selling propositions
(USP’s), technologies mature
2020-2022: fully-fledged business, increased market
share, economies of scale achieved, unit costs dramatically
reduced – EV’s affordable for a wider consumer base