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Nina Isakova INTRODUCTION During the 1990s, Ukraine underwent significant political, economic, social and cultural change caused by the collapse of the socialist bloc and the former Soviet system. In the transition to a market economy, which was one of the most important objectives of transformation, the biggest challenge was developing an efficient private business sector and innovative capacity. Ukraine has no history of private enterprise and this sector of the economy had to be developed from scratch. The overall crisis in politics and the economy as well as a lack of adequate state support policies in Ukraine added to the difficulties in the formation of a small and medium-sized enterprises (SME) sector, which was developing not due to but inspite of government policies. The national innovation system of Soviet Ukraine was not conducive to technology transfer and required radical transformation. The Ukrainian scientific community constituted part of the former Soviet Union science system; it was highly defence-oriented and restricted from international cooperation (Egorov 1995). The following assessment given by Pavitt (1997) holds true for Ukraine. According to this Western expert, ‘the transformation of national systems of science and technology in the formerly centrally planned economies of Central and Eastern Europe has been no different from transformation in other spheres – slow, messy, disappointing, and much influenced by country-specific factors. More specifically radical changes in institutions and in the incentive structures that they face have required competencies well beyond those readily available’ (Pavitt 1997,...