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Innovation Policies for the 21st Century: Report of a Symposium
Dr. Kuhlmann then outlined a presentation that was structured in four parts. Part one laid out the strengths and weaknesses of the German innovation system. Part two briefly introduced the governance structure of innovative research in Germany and the related institutional landscape. Part three delved into innovation policy and programs, at both the level of the German federal government and the level of the Länder, which in the German context was the equivalent of the U.S. state level. Part four considered a number of current developments and challenges for the future.
Strengths of Germany’s Innovation System
Germany’s strength is that it has been and continues to be highly “innovation oriented.” Its gross R&D expenditures have been running at just under 55 billion euros, or around 2.5 percent of GDP. Quite strong in the 1980s, the country’s spending on R&D had fallen during the early 1990s in conjunction with reunification but has been increasing in recent years. Companies account for 66 percent of R&D expenditure, a considerable share in Dr. Kuhlmann’s view, and Germany leads the European Union (EU) in the percentage of small and medium-sized enterprises (SMEs) innovating in-house. Germany’s 14.9 percent of the world market for R&D-intensive goods places it second behind the United States, and it is in the EU’s top three in share of manufacturing sales attributed to new products. Its number of patent applications per inhabitant, 127, is second-highest among large countries, and it ranks third among all nations in international publications with 9 percent of the total.
Dr. Kuhlmann noted that in 2001, business provided the largest share of R&D financing by far, followed by the federal and Länder governments. A small amount of R&D expenditure came from abroad, from either the European Commission or private-sector sources, which had been funding R&D to be performed in Germany with growing frequency. Business dominated performance of R&D as well, followed by the higher-education sector and by nonuniversity research institutions, the latter being a feature typical of the German system and one that he promised to return to later in his talk.
Calling the persistence of risk-averse behavior among banks one of the major weaknesses of the German research system, Dr. Kuhlman noted that financing innovation has become increasingly difficult, especially for SMEs. He then listed some of Germany’s other weaknesses:
It is suffering a clear loss of momentum in some, although not all, of the high-tech sectors in which it had been strong—among them, pharmaceuticals, computers, electronics, and aircraft.