Germany's technological performance

Germany's technological performance is essential for German companies' success in international technological competition. It is the basis for economic growth and viable jobs in Germany. Technological performance is documented by new, innovative products and processes which can compete on international markets. They depend on the creativity of German entrepreneurs and on the commercialization of the results of our efficient public research. But above all, Germany's technological performance will in future depend on the availability of highly qualified workers. Education and research are therefore a top priority for the Federal Government.

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The BMBF regularly commissions studies to evaluate the different aspects of Germany's technological performance and to analyse the strengths and weaknesses of the German innovation system. Once every year, the most important results are compiled in a report on Germany's technological performance, which is submitted to the BMBF by leading independent economics institutes.

 The key findings from their latest report 2005 are as follows.

• Looking at research and knowledge intensities in industry, Germany ranks high in comparison to other countries. Its innovative strength is further underscored by the fact that it produces 277 patents with global market potential per million employed persons whereas the EU and OECD average is 182 and 152 respectively.
• Improvements have been made turning research results into products: In 2003 the share of companies that launched new products or new processes rose for the first time in three years, to 59 percent.
• Sectors with technological strength are reporting increasingly higher levels of export trade. German enterprises account for 15.6 percent of global trade in research-intensive goods, ranking second only to the USA. For years now, German exports of research-intensive goods have grown an average of more than eight percent a year. The ability of German companies to compete in international markets has improved noticeably since the mid-1990s.
• Correspondingly, production and employment in those industries that invest strongly in research and development (R&D) are growing more vigorously than in sectors that do not. Gross output in these industries grew an average of 4.4 percent a year (other industries: 1.5 percent) between 1995 and 2003. Despite the crumbling of the new economy, R&D-intensive and knowledge-intensive fields have been the winners in structural change. Germany's specialization profile has shifted slightly in favor of cutting-edge technologies.

These findings can be attributed in part to a growth in expenditures on R&D: Combined public and private expenditure on R&D as a percentage of Germany's gross domestic product grew from 2.31 percent to 2.55 percent between 1998 and 2003. Research intensity is high in Germany. Research budgets of universities and non-university research facilities grew 3.1 percent a year in real terms in the first years of this decade.

Germany is again playing its strenghts in technology.

But there are factors that may evolve into a challenge for further development. Especially important are:

• Germany invests in R&D - other countries even stronger. Emerging threshold countries are expanding their investment in research and development at an extraordinarily fast pace. This group increased its nominal expenditure on R&D by 180 percent during this period. China alone quadrupled its R&D spending since the mid-1990s. Spending US$ 72 billion on R&D during this period, it catapulted itself to third place on the list of the world's most R&D-rich countries. By comparison, spending on R&D rose by 80 percent in the Nordic countries, by 50 percent in the USA and on average for OECD countries and by 35 percent in Germany.
• Germany's technological strengths revolve increasingly around the automotive sector. This growing dependence on a single cluster is not without risks, particularly since a number of other countries have set focus on this area, too. Cutting-edge technologies are without doubt growing in Germany but are not keeping up with the pace of growth seen internationally in these fields.
• The "knowledge society" needs much more skilled workers with engineering or scientific education than ever before. It is estimated that the German workforce needs approximately 50.000 additional academically trained workers annually. Even in a period of recession on the labour market as in 2003, the number of employed academics in the workforce was higher than in 2002. The past - like the end of the 90ies - also shows that in phases of an economic boom a shortage of skilled engineers and scientists can develop easily that in Germany proved to be clearly more restrictive than in other countries. In light of this, it is a major success that Germany has expanded the share of its first-year university students (per age cohort) by nearly ten percentage points to 37.5 per cent since 1998. However, there still is an insufficient interest in an academic education and an even more restrained interest in science and engineering.

Research and innovation policy measures ba the Federal Government

 The Federal Government has taken numerous mesures to sustain and to strengthen Germany's technological Performance:

• The future investments of the Federal Government into education, research, and innovation have grown since 1998 by about 37% and remain to have high funding priority.
• The German government demands excellent research in Germany. It has proposed a competition for the development of elite universities. This proposal has been submitted to the heads of Germany's state (Länder) governments for a final decision. The Excellence Initiative is to be used to expand cutting-edge research at universities and scientific institutions and make it internationally visible. The government has already initiated far-reaching reforms to improve the structures and efficiency of non-university research. With its "Pact for Research and Innovation", it has signalled its willingness to do everything possible to provide financial planning reliability for scientific and research organizations that receive basic funding and to increase their annual financial grants by at least three percent a year through 2010.
• The German government systematically gears its research funding to technology developments and processes that can potentially be leveraged into substantial growth and jobs with favourable future prospects.
• The German government is boosting the ability of small and medium-sized enterprises to produce innovations. The German government is improving general conditions for start-ups and is re-designing its funding vehicles for technology-oriented start-ups in order to boost entrepreneurial activity and to increase financing for innovation work. The government has, inter alia, improved the general tax rules for venture capital through its High-Tech Master Plan to foster high-tech development and is developing a new, threeparted funding structure for high-tech start-ups to close existing financing gaps. SME participation in funding programs sponsored by the Federal Ministry of Education and Research rose by more than two-thirds during this period.
• The government is responding to the growing need for skilled workers and the international competition for highly qualified workers with a number of measures aimed at strengthening Germany's education system and universities. The government's reform of the Federal Training Assistance Act giving financial aid to students was an important factor in fostering the inclination to a university education. The field of engineering or natural science has particularly benefited from these activities. The German government continues its work on overhauling the country's vocational training and further training system. These activities are also commended in the current Report on Germany's Technological Performance.
• The government has launched the Partners for Innovation initiative to boost momentum at all levels of the German innovation system: This initiative is jointly sponsored by leading representatives from industry, trade unions and the science community.

With these and other measures the Federal Government acts on the recommendations of the experts formulated in the reports on Germany's technological performance to keep Germany innovative.