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  5. Large innovation budgets produce only partially successful innovators

Large innovation budgets produce only partially successful innovators

Large innovation budgets produce only partially successful innovators

Companies in Germany have recently invested more in innovations. The expenses of the German economy rose sharply in 2006 with a plus of six percent and in 2007 with a plus of 5.5 percent. So far, 2008 has been relatively modest at around two percent.

“So far, however, these increasing investments in the future have not been reflected in an increase in the number of successful innovators,” reports the Center for European Economic Research (ZEW) in Mannheim. The proportion of companies that were able to establish new products on the market only increased slightly. The researchers refer to their recently published “German Innovation Survey 2007”.

The economic upturn, which is reflected in higher demand for sophisticated products, and increased pressure from competitors were the main reasons for the strong increase in innovation expenditure. The ZEW was able to observe an increase in innovation budgets in all sectors of the economy: In industry, expenditure on the development and introduction of new products and processes increased by four billion euros to 82.8 billion euros in 2006 (plus five percent). The knowledge-intensive service providers also increased their innovation expenditure by a good five percent to 22.1 billion euros.

At 8.0 billion euros, the other service providers provided eleven percent more funds for innovation projects. However, the strong increase in innovation budgets went hand in hand with the increase in sales, so that the ratio of innovation expenditure to sales – the so-called innovation intensity – has hardly increased. In industry, the innovation intensity remains unchanged at 4.9 percent. In the knowledge-intensive service sectors, it rose slightly from 5.5 to 5.6 percent.

Companies in Germany were more successful with their innovation projects in 2006 than in previous years. In 2006, new products contributed 19 percent to the total turnover of the German economy. This is an increase of one percentage point compared to 2005. This increase is primarily due to the development of other service providers, who were able to increase their share of sales with new products from 6 to just under 7.5 percent. In contrast, the innovation success with new products at industrial companies and knowledge-intensive service providers increased by only half a percentage point.