Opening Remarks for Germany

Georg Schütte
State Secretary for Education and Research

Secretary Schütte welcomed his American colleagues and guests, and commented on the “wonderful event” held several months earlier at the American Embassy in Berlin. That event, attended by Charles Wessner from the U.S. National Academies and organized by Ambassador Murphy, served as preparation for the current symposium, “an intensive dialogue on the best paths for research policy, technology and innovation policy.”

The current symposium, he said, sends important signals in two ways. The first was a common basic conviction shared by the United States and Germany: the belief that science, research, and innovation are central in the search for solutions to the major challenges of our time, including climate and environmental protection, improved health care, safety issues, and economic prosperity. Despite the need for budgetary restraint in both countries, both the administration of President Obama and the federal government in Germany had committed themselves to investment in research and development and affirmed the need to assign them higher priority.

The United States and Germany have cooperated closely for decades in the fields of science and technology, Secretary Schütte said, as the technological capabilities of two countries have grown. At the same time, both are facing great challenges. An appropriate response, he said, is for both sides to search together for ways to make efficient use of their resources of talent and capital, and to maintain the open exchange the two nations have enjoyed as long-time friends.

LEARNING FROM EACH OTHER

He offered three theses as a starting point for the symposium. The first was that the United States and Germany can learn from one another only when they understand their differences. They differ in fundamental ways, for example, in technological performance and competitive ability. In the past two decades, the United States had been at the forefront of global technological change, with high technology and new business models driving U.S. competitiveness. “In almost all types of advanced technology, it is American research centers and enterprises that are leading.” At the same time, he said, the United States is



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PROCEEDINGS 39 Opening Remarks for Germany Georg Schütte State Secretary for Education and Research Secretary Schütte welcomed his American colleagues and guests, and commented on the “wonderful event” held several months earlier at the American Embassy in Berlin. That event, attended by Charles Wessner from the U.S. National Academies and organized by Ambassador Murphy, served as preparation for the current symposium, “an intensive dialogue on the best paths for research policy, technology and innovation policy.” The current symposium, he said, sends important signals in two ways. The first was a common basic conviction shared by the United States and Germany: the belief that science, research, and innovation are central in the search for solutions to the major challenges of our time, including climate and environmental protection, improved health care, safety issues, and economic prosperity. Despite the need for budgetary restraint in both countries, both the administration of President Obama and the federal government in Germany had committed themselves to investment in research and development and affirmed the need to assign them higher priority. The United States and Germany have cooperated closely for decades in the fields of science and technology, Secretary Schütte said, as the technological capabilities of two countries have grown. At the same time, both are facing great challenges. An appropriate response, he said, is for both sides to search together for ways to make efficient use of their resources of talent and capital, and to maintain the open exchange the two nations have enjoyed as long-time friends. LEARNING FROM EACH OTHER He offered three theses as a starting point for the symposium. The first was that the United States and Germany can learn from one another only when they understand their differences. They differ in fundamental ways, for example, in technological performance and competitive ability. In the past two decades, the United States had been at the forefront of global technological change, with high technology and new business models driving U.S. competitiveness. “In almost all types of advanced technology, it is American research centers and enterprises that are leading.” At the same time, he said, the United States is

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40 MEETING GLOBAL CHALLENGES challenged to maintain this leadership as it recovers from the economic crisis and faces new competitive pressures from Southeast Asia. In comparison, Germany directs a similar proportion of its GNP to research and development, ranging from 2.5 to 2.8 per cent, but this support is apportioned differently than in the United States. Funding is directed predominantly to traditional industries—automotive, chemicals, machinery— and serves to integrate newer technologies into these industries, to develop and integrate these areas into system products, and to develop high technology in a step-by-step manner. As one consequence, Germany is weak in the ICT sector, but strong in the automotive sector. Germany barely has any profitable Internet platforms but is developing the Internet of “things,” the cyber-physical systems. Germany is a major software producer not as much for consumers as for systems technology. Germany is strong as well in production technology, he said. The country’s role could be described as that of “world supplier and equipper.” CONTRASTING THE GERMAN AND U.S. INNOVATION SYSTEMS His second thesis was that these technological specializations are mirrored in the countries’ different innovation systems. The U.S. success with cutting-edge technologies is closely linked to several factors, beginning with the leadership of major research universities. A second factor is entrepreneurial spirit, which leads to success in new business models. A third factor for success has been the United States’ ability to attract the best talent from around the world. Yet another strength, he said, are its highly efficient capital markets, particularly the availability of venture capital and risk capital. Finally, technological success is supported by government investments in R&D, which is “markedly higher than in Germany and Japan.” These factors combined, he said, to create opportunities for disruptive innovations that are “significantly greater than in Germany and Europe.” In Germany, Secretary Schütte said, assets include the steady strengthening of the small and medium-sized enterprises known as the “hidden champions.” These SMEs specialize in certain niches, and become world leaders in very specific technologies, notably through the highest levels of quality. For these companies, the economic crisis was an opportunity to re-examine and adjust their portfolios, procedures, and structures. More generally, German companies benefit from the close integration of large and small companies, close ties with public research organizations, and links with the Fraunhofer Society, which works at the interface between publicly funded research and corporate research institutes. He noted the high efficiency of German universities and German research centers, not so much in individual projects but in their breadth, along with a long-standing debate regarding whether this model is sustainable.

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PROCEEDINGS 41 “Some analysts tell us,” Secretary Schütte said, “that we’re now riding in the dining car of the world economy and eating for breakfast the opportunities that the market is currently offering. These include a boom of supply and demand for new technologies from South Asia and Southeast Asia, which in some ways are complementary to German strengths. But when this boom is over, the analysts say, we will have to pay the price.” He added that no one could tell whether this was “a typical case of German self-doubt, or whether it is the correct view.” At present, he said, Germany is seeing high demand for energy and environmental technology products and, more generally, for systems technologies. Economic growth is above long-term trends and many industries experience labor and skills shortages. This brings a new set of issues for the German innovation system: how can the country use its finite human and capital resources in the most flexible and productive ways? In the face of limited resources, how can Germany continue to create value and increase the income of the citizens? A new challenge is to integrate into the labor market talents that remain on the periphery because they come from different cultural backgrounds. SIMILARITIES AND COMPLEMENTARITIES His third thesis, he said, drew not from differences between the two countries but from similarities. Germany and the United States have similar resources in research, technology, and innovation policy. One such resource is an ambitious and comprehensive innovation strategy. A common feature of both strategies is addressing the need to better translate available funding into innovations. The basis for innovation in both countries, according to analysts, is an efficient scientific system. Similarly, both countries cooperate in addressing “grand challenges,” including energy research, energy supply, mobility, and electric mobility. Both search for solutions that span the political field, including cross-application technologies. The U.S. supports the Nanotechnology Initiative (NNI); Germany has an Action Plan for Nanotechnology. Both use similar orientations and similar instruments. Both countries work to unleash entrepreneurial spirit, support young companies, and broaden and improve the framework for technology-oriented businesses. Both are struggling to respond to the challenges posed by Southeast Asian competitors. For each, education is the foundation for present and future policies. “But with all this in common,” he said, “we should not forget that our two institutional frameworks are quite different,” including the customs and even the rhetoric used to describe frameworks and challenges. KEY QUESTIONS Secretary Schütte concluded by offering a summary of some of the questions that drive Germany. First, it seems sensible to compare “best practice”

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42 MEETING GLOBAL CHALLENGES examples for various specific fields. What solutions and which models work, for example, in energy policy and energy research? What can the countries learn from one another in policy design? Second, he said, the countries face similar unresolved challenges on many issues, including patenting, network neutrality, electro-mobility, and bio- medicine. “It seems meaningful to ask: What is the state of affairs? How can we compare them? What can we learn from each other?” Finally, he asked, “where can we succeed through increased cooperation to tap into common potentials?” For example, he suggested, both countries share an interest in using renewable energy as efficiently as possible. In such areas, there may be not only common technological interests, but also common political challenges and goals. “If we share a consensus that education, research, and development are so important that they should take precedence over other policy areas, how can we convince our political representatives? How can we convince the public that it is important, despite the need for fiscal restraint, to spend more money in this area than in other areas?” Secretary Schütte recalled President Obama’s State of the Union address, in which he said “we need to out-innovate, out-educate, and out-build the rest of the world.” If that is correct, he said, it will require individual countries to find parts of the answer. But it will also require cooperation among those nations to find the full set of answers and implement them together. “It’s this combination of competition and cooperation that will lead us forward,” he concluded, urging participants to keep this in mind throughout the symposium: “Where can we cooperate? How can we cooperate in such a way that competition will help us move forward?”