potential burden for the future. This shortage of skilled workers is brought about by demographic change, which promises to become more acute.

Given these weaknesses, Dr. Jäkel said, the German government had made the courageous decision, in the midst of a financial crisis, to elevate the support for research, development, and training in its High-Tech Strategy for 2020. It decided to invest six billion Euros in R&D in the current legislative period, and six billion in the education system. “We had a large consensus from all the major parties,” he said, “that our future depends on innovation, research, development, and education, and that this is not the moment to economize.” He said that the investment by the private sector did not drop significantly, while the state contribution increased.

He turned to the very large number of SMEs, calling them “the backbone of industry.” These have often been family businesses for three, four, five or even more generations, and he stressed that “these companies have a very long-term orientation. They are not focused on the next board meeting, or the next business cycle, but very much on the long run.”

As an example, Dr. Jäkel recalled visiting one of these “hidden champions,” a company located “behind the seven mountains,” or in the countryside, but with close regional ties to educational and research institutions. This family firm had worked with these institutions from generation to generation, continually re-inventing itself according to new opportunities. The father and the grandfather had long made jukeboxes and cigarette machines, but now the company had upgraded its skills to become a global leader in electronic connections for urban use and also plug-in connections for wind turbines and similar facilities. The current owner is working in robotics with help from the German Institute for Artificial Intelligence. “So you can see the evolution of this company over a short time period—the company remains the same, with the same family name, but it is reinventing itself, as are many SMEs in Germany.”

German innovation policy, he said, is designed to prepare the ground for the future for these companies. Most important, he said, is the economic framework, especially for SMEs that are not in a position to move their sites. Equally important is the issue of entrepreneurship in Germany, so that new companies enter the market and stimulate competition. It is also important that existing SMEs are assisted in using the research facilities of universities.

Addressing the broader concerns of SMEs, Dr. Jäkel said that taxes are always a major issue, despite a recent reduction of the corporate tax to be more competitive globally. One problem has been that German capital receives worse treatment than foreign capital within the tax system, which affects the health of the VC industry. Another drawback, he said, “is the loss of contracts, which is important particularly in biotechnology, because in Germany the use of debit carryovers is limited.” He said that this situation had not yet been remedied, because “unfortunately, finance ministers think differently than innovation leaders.”

An important need is a stronger infrastructure for patent rights and other intellectual property. “We are in the midst of creating a European



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