Companies are afraid of a downturn and are changing their strategy

Around half of those surveyed expect budget cuts in the area of ​​innovation in the event of an economic downturn, and only three percent expect greater financial leeway. Last year, companies’ expenditure on research and development increased by almost six percent to a total of a good 75 billion euros. However, the energy crisis and the prospect of a possible recession could now also influence innovation activities.

However, this does not necessarily mean that innovations are being scaled back. Max Orgeldinger, co-founder of TLGG Consulting and one of the authors of the study, rather sees that a “refocusing” and “prioritization” is in the offing in some sectors. “The main thing now is to use the funds in such a way that they are effective,” says Orgeldinger.

However, how far this trend goes depends on the industry and its individual economic future prospects. According to the study, around two-thirds of the innovation experts surveyed expect an economic downturn in their sector. 43 percent want to adapt their innovation strategy to these expectations.

The prospects of the companies are not only characterized by pessimism. “In the financial sector, there are currently good framework conditions for being particularly innovative,” says study author Orgeldinger. This includes a positive business environment, for example due to higher interest rates.

industry reluctance

At the same time, there is great pressure to innovate on traditional financial institutions so as not to lose touch with the many technological developments in the financial sector. “There is also a high demand for new solutions in the energy sector,” says Orgeldinger. This promotes the willingness to invest in innovations.

According to the authors, the situation is different in traditional industrial sectors such as mechanical engineering or the automotive industry. In these sectors, companies are primarily concerned with getting through a phase of lower demand. The automotive industry is considered a major player in innovation spending. According to the Stifterverband, the industry is responsible for 34 percent of research and development expenditure.

The responsible federal minister, Bettina Stark-Watzinger (FDP), recently stated that the current “major challenges” must be met through research and innovation, and calls for Germany to take a leading role in key technologies.

Technology is the topic of the future for companies

In fact, technology topics are particularly popular with companies. According to the study, artificial intelligence will become more important for 80 percent of companies, followed by circular economy and cloud computing (both 57 percent).

In order to make progress in these areas, the study recommends cooperation with start-ups. While this so-called corporate start-up partnering (CSP) is already being practiced by large corporations, even large medium-sized companies are often hesitant at the moment.

>> Read here: How cooperation between medium-sized companies and start-ups can succeed

Overall, the German economy is considered to be rather cautious when it comes to innovation spending in an international comparison. In a country comparison by the OECD, Germany was behind many other countries such as Israel, Belgium and Austria. “The German approach to innovation is rather conservative,” explains Orgeldinger. But that doesn’t necessarily have to be a bad thing, especially in times of economic downturn.

Because, as the digital expert says: “Technology topics are cyclical in nature.” In some areas, there is often a real hype in which extremely heavy investments are made. In economically weaker phases, on the other hand, a somewhat more sober perspective dominates, which could be quite healthy from a market point of view.

More: Industry is investing more in innovations again – but one industry is lagging behind