Is the German economy running out of ideas for new products?
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Berlin Germany threatens to fall further behind internationally as a country of inventors. Because only every fifth company in this country can describe itself as particularly innovative. In 2019, this still applied to every fourth company. Almost four out of ten companies have stopped actively looking for innovations.
A new study by the Bertelsmann Foundation points to the growing weakness in innovation. “Our prosperity is at massive risk when fewer and fewer companies see themselves as technological pioneers or no longer dare to make far-reaching innovations,” warns Armando García Schmidt, economics expert at the Bertelsmann Foundation.
For the representative study, the research and consulting institute IW Consult surveyed more than 1000 industrial companies and industry-related service providers. It ties in with a study from 2019.
A Civey survey commissioned by the Association of Research-Based Pharmaceutical Companies (vfa) presented on Wednesday came to a similar conclusion. Accordingly, more than every second German did not agree with the statement that Germany was still a country of inventors.
2511 people took part in the survey, the answers are also broken down by manager and self-employed. 77 percent of this group said that reducing bureaucracy must be promoted as a measure to ensure prosperity in Germany. More than half also named well-paid jobs as a success factor. High-tech production is also a key factor.
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The figures cast a gloomy light on Germany as a business location, which companies see as being endangered by rising costs and rising social security contributions. If the new ideas are then still missing, this can become a competitive disadvantage.
As in 2019, the study for the Bertelsmann Foundation evaluated the innovative strength of companies based on 30 criteria. This includes, for example, whether they have brought product or process innovations to the market or how networked they are with science and other companies.
The companies are then divided into seven groups – from the technology leaders and disruptive innovators at the top to the companies without an innovation focus at the bottom of the scale.
This shows that the proportion of technology leaders who clearly stand out from the rest of the companies in terms of their innovation activities and the success of their business model was only slightly above the level of the preliminary study in 2019 at seven percent in 2022. The proportion of disruptive innovators who stand for revolutionary innovations has even fallen from 19 to twelve percent in the three years.
On the other hand, there has been strong growth in the groups of companies that develop new products or processes more or less by chance or that have completely withdrawn from the innovation process. In 2019, 27 percent of companies stated that they were not actively looking for innovations, but the proportion has grown to 38 percent in the past year.
Corona pandemic as a reason for weak innovation
One reason for the growing weakness in innovation is the corona pandemic, in which companies that were not very innovative became even more risk-averse. In many cases, companies postponed planned renewal activities or canceled them entirely. Cooperation with science has not been significantly expanded either.
But the pandemic is not the only reason for the development. “Innovation cycles are getting shorter and shorter,” says Schmidt. In addition, more and more capital has to be expended in order to develop an innovation and keep it on the market. The shortage of skilled workers is also a problem.
In individual cases, however, one’s own success does not turn out to be a blessing, but a curse. Many once innovative companies concentrate on satisfying their customers within established business models and further developing their products according to their needs.
According to the study, this is at the expense of radical new developments or completely new business ideas. The close proximity to customers often hinders groundbreaking ambitions.
>> Read here: Innovation backlog and mountain of debt: The fragile success of Deutsche Telekom
The declining innovation dynamic is a danger for the location – not only because the innovative companies are characterized by a significantly higher net return on sales and a stronger increase in employment than the other companies, says Schmidt.
The transformation to a more sustainable economy can only succeed with new technological solutions in the field of climate neutrality. And with the National Circular Economy Strategy, politicians are already working on the next step towards a resource-saving economy.
“German companies still have the chance to be among the best in the world and to set technological standards,” emphasizes the expert from the Bertelsmann Foundation. To do this, however, they would have to strengthen their innovation profile now.
More: Germany is behind Belgium in terms of innovation