German companies invest billions in research | Germany| News and in-depth reporting from Berlin and beyond | DW | 24.12.2013
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German companies invest billions in research

In 2013 German companies spent 54 billion euros on research and development, strengthening Germany as a business location in the international competition. Above all car manufacturers are digging deep into their pockets.

German companies have invested nearly 54 billion euros in research and development in 2013: More than ever before. According to a survey of the Donors' Association for the Promotion of Humanities and Sciencesin Germanythis is an increase of more than five percent in comparison to last year. For economist Jan Wieseke from the Ruhr-University Bochum this record sum proves that the companies have learnt from the financial and economic crisis.

According to Wieseke the immense investment in research and development signals "that one is aware of the more intensive and international process, and thereby also the setting the course for future technologies". In the end the business location Germany will benefit from it.

Internationally still room for improvement

Within the European Economic Area, Germany is on the third position when it comes to expenses for research and development. It is well ahead of the UK, France and Italy, only Sweden and Finland rank higher than Germany. But in international comparison German companies need to catch up according to Gero Stehnke of the Donors' Association for the Promotion of Humanities and Sciences in Germany. Traditional candidates with a constant growth such as South Korea and Japan invest much more. China has now caught up vigorously. However, the study of the Donors' Association sees Germany on the right track.

Companies have not only increased their internal research and development expenses, but given external contracts worth almost 13 billion euros to universities and research institutions. The bottom line is this is an increase of 3.8 percent.

Automobile manufacturers are in the lead

Volkswagen assembly in Germany (Foto: Hendrik Schmidt/dpa (c) dpa - Bildfunk)

Volkswagen is the world's biggest investor in research

Like in past years it is mainly the industrial companies that are using large sums of money: Above all, the automotive sector, with around 24 billion euros. Thus, 37 percent of the money spent on research and development accounts for vehicles alone. The producers of passenger cars and trucks increased their budgets by about 6.4 percent. VW is the giant in the industry: The automotive group from Wolfsburg invested more than 2.5 billion euros in research globally in the third quarter of 2013.

Andreas Kladroba of the Donors' Association believes that the positive trend will continue. After all, funds for the development of electric mobility are continuing to flow in Germany. "But fully automated or semi-automated driving", Andreas Kladroba explained, "are areas where a lot is being done by the automobile industry and where new ground is certainly also broken".

Domain of large companies

In addition to the automobile manufacturers, the electrical industry, mechanical engineering, chemical and pharmaceutical industries are among the sectors that spend the most money on research and development. More than three quarters of the money spent on research comes from companies with more than 1,000 employees. The Donors' Association has identified a growing number of small businesses that invest intensively in research, but their share in the total expenditure is low.

Forschung im Labor Symbolbild

Small companies generate a higher number of patents with less staff and fewer resources

According to economist Jan Wieseke this may apply to the sum but not to the efficiency. For many SMEs, which are called hidden champions, prove "an incredible efficiency in the expenditure on research and development. This means that these companies are able to generate higher number of patents with fewer resources and fewer staff".

Stable growth rates

Gero Stehnke thinks that the fact that research and development in many companies are primarily aimed at constantly improving products is normal. "There are definitely companies and markets that are predestined for product improvement". He cites the Chinese market as an example, where German companies are literally forced to do research and development if they want to gain a foothold there. In essence, it is about the adaptation of European products to the requirements of the Chinese market.

Professor Jan Wieseke says that research and development must be profitable for businesses. However, he notes that "in German culture traditionally the emphasis is rather put on so-called incremental innovations". In other words, products are improved to perfection, while new ideas are less in focus. Overall, the Donors' Association sees the German economy on the right track. After all, the surveyed companies said their planned growth rates for research and development in the coming period are up to five percent.

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