Innovation Indicator 2011: Germany has improved markedly

KIn a ranking of 26 industrialized countries, Germany has risen to fourth place – Large public sector investments in research and science very effective – Companies need tax incentives for research and development – Germany's education system remains its greatest weakness
Bonn/Berlin, 13 October 2011: Germany has significantly improved its innovation performance in the past five years and now occupies fourth place in a comparison of 26 industrialized countries (2009: place 9 out of 17). The main reason for this improved ranking is the high public investment in research and science. This conclusion is reached by the Innovation Indicator 2011 which the Deutsche Telekom Stiftung and the Federation of German Industries (BDI) published for the sixth time this year. "The intensive efforts in the past years to strengthen Germany's innovativeness are paying off. Even during the financial and economic crisis, many businesses still invested heavily in research and development. This strategy on the part of German industry contributed significantly to the fact that Germany weathered the crisis so quickly", Dieter Schweer, member of the BDI Executive Board, explains the results.

Education continues to be one of the major weaknesses in the German innovation system. The deficiencies in the education system caused Germany to slide down to place 17 in the innovation ranking (2009: position 12). "For a major industrial and technology nation, Germany's bad performance in education is simply not acceptable. Education must become the mega issue, not only in political speeches, but also in everyday life,“ demands Dr. Klaus Kinkel, President of the Deutsche Telekom Stiftung. "Without good education there can be no good research, no innovations and thus no sustainable growth."

The country ranking is led this year by Switzerland, followed by Singapore and Sweden. The USA falls behind considerably, landing in ninth position (2009: position 1). The Asian region is clearly catching up in terms of innovation intensity. The results of 2011 underscore that the region is developing into one of the world's most important economic areas. Asia is thus an attractive area for research, development and investments. As far as their innovation intensity is concerned, the so-called BRICS countries Brazil, Russia, India, China and South Africa still have a great deal of catching up to do. The study, however, shows that they are increasingly gaining ground and are developing into power centers. China plays a special role in this group, not only because of its size and dynamics, but also because of its population's great willingness to innovate. The experts are expecting massive growth in innovation in China.

The Innovation Indicator was issued this year for the first time by a consortium of institutes. Among them are the Fraunhofer Institute for Systems and Innovation Research (Fraunhofer ISI), the Center for European Economic Research (ZEW) and the Maastricht Economic and Social Research Institute on Innovation and Technology at the University of Maastricht (MERIT). The economists examined the innovative capability of 26 countries in all significant fields: the economy, science, education, state and society. In concrete policy recommendations, the experts advise Germany to promote research and development by industry through tax incentives, to offer young scientists professional perspectives and to protect intellectual property reliably. Similarly, Germany needs more academically and professionally qualified workers, a joint task for the federal government, the federal states and local government.

Companies need tax incentives for research and development

The country comparison shows that tax incentives are the international standard. Compared with most other developed countries, the German government provides less financial support for research and development activities conducted by firms as a whole and exclusively utilizes direct project funding instruments. Thus the companies in Germany have to develop their innovations without tax relief. The federal government – according to the experts – could by using tax incentives trigger off continuous research and development activities and thereby enhance Germany's attractiveness as a location for innovation. The tax relief would benefit all firms undertaking research and would be an important location factor, particularly for international enterprises. Small and medium-sized firms in particular that are undertaking research and development for the first time or are considering increasing their expenditures in this area would profit from this measure. Direct project funding instruments are frequently too time- and resource-consuming for SMEs.

The education system remains Germany's greatest weakness

With the exception of vocational training, Germany does not perform well in any of the education indicators. The dual system contributes significantly to innovation success, but cannot compensate for other weaknesses. Academics and professionally qualified staff are lacking. Germany is lagging behind, even in the former German stronghold, the share of doctorates in science, technology, engineering and mathematics (STEM). Long-term improvements – according to the innovation researchers – require among other steps educational alliances between the federal government, the federal states and local government with authority to maneuver. Federalism in the area of education is in (urgent) need of reform and the ban on cooperation between the federal government and the federal states, which is rooted in the German constitution, must be revoked.

New research methodology

The Innovation Indicator 2011 was prepared using a new methodology. The methodological changes were made in such a way, however, that a substantive connection with the investigations of previous years is ensured. "The current country ranking clearly reflects Germany's strong position“, says the scientific head of the study, Professor Marion A. Weissenberger-Eibl from Fraunhofer ISI. "We have reduced the number of indicators, but at the same time we are taking more countries and above all new competitors like China, India, Brazil and Russia into consideration.“ In addition, a model that links input and output factors was one of the new methodological developments included in the study. This refers on the one hand to resources which enter the system (for example, the number of university graduates) and, on the other hand, resources which emerge from the system (for instance, the value added per working hour in industry). Besides such hard data, soft factors are also included in the Innovation Indicator, as in previous years. These include opinions from the business world or the risk tolerance of the population. In total, the new Innovation Indicator comprises 38 single indicators which are relevant to describe the innovativeness of a country.

All results and figures are accessible for downloading in the Internet under www.innovationsindikator.de and under www.telekom-stiftung.de/innovationsindikator, the Key Facts as an English Extract.

Contacts (for the media):

Deutsche Telekom Stiftung
Andrea Servaty
Head of Press and Communication
Tel.: 0228 - 181 92205
Andrea.Servaty@telekom.de
www.telekom-stiftung.de

Federation of German Industries (BDI)
Dr. Olga Wilde
Press Officer
Tel.: 030 - 202 814 20
presse@bdi-online.de
www.bdi-online.de