KfW presents its twelfth Innovation Report. The proportion of innovative SMEs reaches a new low.
The proportion of innovative companies among German SMEs is declining dramatically, according to the latest KfW Innovation Report. Only 22 percent of German SMEs are classified as "innovators," meaning innovation-driven companies. In the first Innovation Report (2002/2004), this figure was 42 percent; in the most recent report (2012/2014), it was still 29 percent. KfW defines all companies in Germany with a turnover of half a billion euros or less as SMEs. Small businesses with fewer than 10 employees, as well as construction and service companies, are most affected by the declining proportion of innovators.
Spending on innovations, however, has remained stable in recent years: After spending between 36.8 and 38.0 billion euros, investments totaled 36.7 billion euros in 2015. Companies with fewer than 50 employees have reduced their innovation spending in recent years. Larger companies have offset this decline with increasing innovation budgets.
KfW Chief Economist: “We need more courageous founders”
KfW Research, the in-house institute, attributes the decline in innovative companies to the economic situation: The figures refer to the years 2013 to 2015. Amid the euro crisis, there was a high level of uncertainty regarding the economic and political environment. Regarding the longer-term trend, the KfW Institute identifies several reasons for the decline in innovators: difficulties with financing, demographic developments, and the shortage of skilled workers.
KfW Chief Economist Dr. Jörg Zeuner recommends:
"In order to revive the declining innovation activity among German SMEs, which has been declining for years, it is important to strengthen the innovation system as a whole. Ambitious goals should be set and we should not rest on our laurels. This applies, for example, to investments in research and development in the public and private sectors. The target of 3.0% of gross domestic product set by the EU in the Lisbon Process has almost been reached. However, other countries are pursuing even more ambitious goals. Therefore, we need more courageous founders, more qualified specialists, strong financing partners who enjoy trust and can bear innovation risks on a larger scale, the willingness of scientists to allow their results to be used entrepreneurially, and also a social climate that welcomes innovation and change."
