This chapter aims to assess the innovation capacity of SEE and its individual components, as well as issues pertaining to the integration of technology in SEE. First, we briefly explain the concept of national innovation capacity (NIC), which serves as our conceptual framework, and this is followed by an analysis of the position of the SEE countries in terms of their innovation capacity. The analysis will then be extended to cover issues of technology integration distinguishing between upstream integration (R&D cooperation) and downstream integration – foreign direct investment (FDI) and production network
