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.