Abstract
This paper argues that EU accession has brought about minimal changes in the patterns of innovation in Hungary. The reason why is not that the ‘EU factor’ is of minor importance; rather, it is Hungary's inability to use EU resources effectively, so as to fully benefit from EU membership. The Hungarian story also demonstrates that the EU cannot block member states from reversing reform or abusing the opportunities EU membership offers to them. We contend that globalization (global value chain integration) has more effectively contributed to Hungary's knowledge-based upgrading than Europeanization (in the sense of policy transfer; access to EU Structural & Cohesion Funds, and integration in the European Research Area). This argument is substantiated with a case study on innovation strategy design and implementation, which illustrates the ambiguous impact of Europeanization, which is contrasted with our investigation of integration in global value chains, conducted through interviews of foreign-owned manufacturing companies about their R&D-based upgrading experience.