period of retooling and start-up production of new 

 technology; (2) reimbursement of the collectives of 

 the enterprises for losses to the incentive fund due 

 to reduced profitability during the period of assim- 

 ilation of new products and processes; and (3) re- 

 wards for workers at enterprises, assembly and ad- 

 justment organizations, and other technology transfer 

 facilities for the development and adoption of new 

 technology ,°2 while special financing arrangements 

 have been instituted to achieve the first task, a 

 combination of special incentive programs and alter- 

 ation in the basic conditions and evaluative crite- 

 ria influencing motivation have been developed to ad- 

 dress the other two. Brief attention is given to 

 several of these programs . 



When the producer does face high start-up costs, 

 the superior administrative organ is required to 

 stipulate in the plan adequate sources to cover these 

 costs. ** First, for "one-off" or very small lot pro- 

 duction, expenses may be covered in the price of the 

 product. Second, although increasingly rare, the es- 

 tablishment may receive budget grants comparable to 

 budget grants for R&D projects of especially high 

 priority. The GKNT may be expected to have an impor- 

 tant role in administering such grants. A third 

 source is the Fund for the Assimilation of New Tech- 

 nology or the New Products Fund, formed by ministries 

 on the basis of a deduction from total cost of pro- 

 duct ion. OH Part of this Fund is held by the minis- 

 try for application where needs are the greatest. A 

 fourth source is the Fund for the Development of Pro- 

 duction, formed at industrial establishments on the 

 basis of their performance. It is used mainly for 

 modernization, automation, and the introduction of 

 new products. Improvements in the performance of the 

 enterprise which lead to better labor productivity, 

 cost reduction, improved quality, and a higher rate 

 of profit can also be financed from this Fund. The 

 bulk of the Fund is used to purchase capital equip- 

 ment and does not form part of R&D expenditure. It 

 does, however, ipso facto promote the process of in- 

 novation. The Fund for the Development of Production 

 is formed from three sources: deductions from enter- 



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