Innovation Indicator for Germany 2007.

Transcription

1 Early Education Secondary Schools Universities Innovation Innovation Indicator for Germany Summary.

2 Imprint. Published by Deutsche Telekom Stiftung Graurheindorfer Straße 153 D Bonn Tel Fax Bundesverband der Deutschen Industrie e.v. (BDI) Breite Straße 29 D Berlin Innovation Indicator for Germany report written by: Deutsches Institut für Wirtschaftsforschung e.v. (DIW Berlin) Mohrenstraße 58 D Berlin Responsible for the Content Dr. Ekkehard Winter, Deutsche Telekom Stiftung Dr. Carsten Kreklau, BDI Editors Dr. Uwe Claßen, Stephan Hochrebe, Dr. Matthias Müller, Dietmar Schnelle DIW Berlin 2007 Project Team Prof. Axel Werwatz, Dr. Heike Belitz, Marius Clemens, Tanja Kirn, Jens Schmidt-Ehmcke, Stephanie Schneider Design and Script edition agrippa, Köln Berlin Layout and Production SeitenPlan GmbH Corporate Publishing, Dortmund Printing Farbinstinct GmbH, Bochum Photos Bayer, Deutsche Messe, Deutsches Institut für Wirtschaftsforschung, Schott As at October 2007 Copyright Deutsche Telekom Stiftung Education as a Future Power: Deutsche Telekom Stiftung. Deutsche Telekom Stiftung (Telekom s Charitable Foundation) is a registered charity that aims to improve education in mathematics, natural sciences and technology. With a capital of 100 million euros, they are one of Germany s largest corporate foundations. Based on the premise Start Young, the Foundation is involved in projects at kindergarten and primary school for the education and development of young children. Enthusiasm is Catching On is the motto of their projects at and with secondary schools. Together with universities, they aim at Advancing Advanced Education. The Foundation believes that a better understanding of research, technology and innovation is part and parcel of a broad-based general education for people who live like we do in a networked knowledge and information-based society. Just how exciting science can be or how important innovations are for the future is illustrated in their fourth area of activity: Innovation. Under the heading From Start to Finish, the Foundation helps stimulate public awareness and interest in these topics, remove prejudices and promote dialogue between politicians and the public. Umbrella Organization for German Industry: BDI. The Bundesverband der Deutschen Industrie (BDI, Federation of German Industries) is the umbrella organization for industrial businesses and industry-related service-providers. As the representative of the interests of industry, the BDI coordinates the views and recommendations of its members. It provides information covering all fields of economic policy. The BDI thus supplies support for businesses in the task of keeping pace with the intensive competition resulting from globalisation. With 38 affiliated industrial sector federations, it represents the interests of over 100,000 private enterprises employing over 8 million people. The Federation of German Industries (BDI) is an association of associations. As stipulated in the BDI s statutes, membership is confined to industrial sector associations and working groups acting as umbrella organizations to represent entire industrial groups within the territory of the Federal Republic of Germany. The BDI s legal status is that of a registered society. 2

3 Early Education Secondary Schools Universities Innovation Competition to Innovate Among Industrialised Nations. Key Results. Innovation Indicator for Germany. The huge impact that innovations have on the future of a country is today an undisputed fact. At the same time, the race to innovate is becoming increasingly dynamic the world over. This poses a constant challenge for highly developed industrialised nations for the simple reason that today s state of the art can quickly become tomorrow s standard technology that can be manufactured at a fraction of the price elsewhere. To find out how a country can improve its capacity to innovate, you first have to take stock and answer a range of questions: What are the major factors determining the capacity to innovate? How do these factors relate to each other? How does a country stand internationally in the competition to innovate? What are its strengths and weaknesses in comparison to other nations? To obtain scientifically sound answers to these questions, in 2005 Deutsche Telekom Stiftung (Deutsche Telekom Foundation) and Bundesverband der Deutschen Industrie (BDI, Federation of German Industries) commissioned Deutsches Institut für Wirtschaftsforschung (DIW, German Institute for Economic Research) in Berlin to undertake each year a comprehensive comparative study. The Innovation Indicator for Germany 2007 report is the third successive appraisal of the current innovative capacity of each of the 17 leading industrialised nations, with the focus clearly on Germany. The study analyses a range of facts and figures available internationally and, in a series of steps, provides a detailed overview of the innovative capacity of each of the countries analysed (see page 5). The main feature of the analysis is that it takes a very wide approach to innovation: In addition to hard and fast facts and figures, it also takes into account the attitudes and behavioural patterns of the people living in the countries concerned. By including these soft factors, the indicator provides a snapshot of all the key factors influencing the present and future innovative capacity of the industrialised nations. The Result: Sweden Number One, Germany in 8 th Place. The 2007 Innovation Indicator for Germany reveals the following: Sweden is the country with the greatest capacity to innovate, followed by the US, Switzerland and Finland. Germany, in 8 th place, is in the top half of the 17 countries involved in the study (see chart). The score achieved by each country shows the exact differences in how they perform. The same method is used consistently to calculate the overall indicator and all of the individual subindicators. The country considered best in any one category is awarded seven points, the coun- Innovative Capacity of the Leading Industrialised Nations: Overall Indicator for Place Sweden USA Switzerland Finland Denmark Japan UK Germany Netherlands Canada France Ireland Belgium Austria Korea Spain Italy Score Source: Calculations by DIW, Berlin

4 Innovation Dynamism between Changes in the overall ranking: 1995 compared to Scores USA SWE FIN Average of leading group CHE Average of midfield Source: Calculations by DIW, Berlin. JPN DNK CAN GBR NLD GER FRA IRL KOR ESP BEL AUT ITA try considered poorest one point. The scores between one and seven reflect the relative differences between the countries. As the scores clearly indicate, the countries in places one to four are all relatively close together. There is a large gap between them and the remainder of the countries. In the case of Germany, the shortfall between Germany and Sweden, the country with the greatest capacity to innovate, is smaller, at 1.8 points, than the lead which Germany has over Italy, which comes in last. Germany s Strengths and Weaknesses. In international comparison, Germany has a number of outstanding strengths which are the driving force behind its innovative capacity. On the positive side of the balance sheet, one of Germany s greatest innovative strengths is the SWE USA FRA IRL BEL AUT 1995 Year 2007 CAN ESP CHE FIN DNK JPN GBR NLD KOR ITA capability of German companies to market innovative products worldwide. Research is an additional innovation factor, which is also closely related to a further plus point: the extensive networking culture that exists in Germany. Companies in Germany work together very effectively and they also maintain close links to higher education and research establishments. Further strengths of Germany include a highly competitive climate and highly developed infrastructure. Germany does, however, suffer from a number of serious weaknesses, the biggest being the shortcomings of the German education system. An additional stumbling block is the social capacity to innovate, based on the attitudes and behavioural patterns of the German people. In addition, innovative companies in Germany find it particularly difficult to raise start-up capital. Added to that is the abundance of legislation and regulations negatively impacting a company s capability to develop and market innovative products and services. Change in Capacity to Innovate since Only by analysing a longer period of time can we make any definitive statement about the progress made and setbacks encountered by the industrialised countries. The Innovation Indicator for Germany 2007 therefore also examines how each country s capacity to innovate has changed since The results in a nutshell (see chart): Sweden has knocked the US off the top of the table. Korea has made the greatest progress since the nineties and has been able to catch up. Germany has been unable to take such a large step forward but has gone from 10th to 8th place, making it the country to have improved the most in the rankings. A process of convergence can also be observed. In their capacity to innovate, the industrialised countries have, on the whole, become more closely aligned. 4

5 Early Education Secondary Schools Universities Innovation How is Innovative Capacity Measured? Creating the Overall Innovation Indicator. Multi-Step Method. To measure the innovative capacity, DIW first has to obtain a useful set of comparable facts and figures for all the countries involved in the study. To do this, the economists in Berlin review a range of international statistics and select from among some 180 different items of data. They then compile the information in a number of steps. First, they divide the information into seven individual sub-indicators of the innovation system and into three actors. After a further analytical step, DIW calculates the indicator of innovative capacity for each of the 17 industrialised countries involved in the study. Actors of Innovation and Innovation System. DIW describes three actors responsible for determining the capacity of a country to innovate: Companies: They are the driving force behind the whole innovation process. Companies carry the bulk of investments and risks and make marketable products out of innovative ideas. State: Government and administration create the backdrop that impacts the innovative capacity of a country. The variety of factors involved here range from the legislation and regulations passed to the level to which education, research and development are promoted and the demand for innovative products generated. Society: The attitudes of the people living in the country and their patterns of behaviour have a decisive effect on the innovative climate in a country. This includes how open society is to new developments in science and technology, the propensity to take entrepreneurial risks and the degree to which women are involved in the innovation process. The overall innovation indicator reflects seven factors of the innovation system: Education: This is a cornerstone of innovative capacity. A society can only be innovative if it has access to a qualified workforce, inventive engineers and creative scientists. Research and Development: Particularly in the high tech and cutting-edge sectors, R&D is essential for creative ideas to develop and become innovations. Regulations and Competition: Competition fuels innovation. Companies strive to leverage new products to stay ahead of their competitors. The competitive climate is mainly influenced by factors such as intellectual property protection or legislation regulating the registration of new products. Financing: Innovators take risks and have to get by in times when a product is still in the development phase and not making any profit. It is therefore essential that favourable financing solutions are available to enable innovations to reach market maturity. Demand: If consumers are open to innovative products and services and generate a high level of demand for them, this acts as a driving force for innovation. Networking: Active communication and networking within industry and with higher education and research establishments are pivotal in enabling information and knowledge to be exploited faster and more efficiently. Implementation in production: The innovation process is only successful if companies are successful on the market with new products, services or processes. Prof. Axel Werwatz, director of the Innovation Indicator for Germany study. 5

6 Driving the Innovation Process. Companies. For the innovative products and services of tomorrow to reach the market, intensive research and development is crucial. Good teamwork pays off especially in the innovation process. Swedish Companies Come Out Top. Creative ideas are essential for innovation. More importantly, however, companies have to be successful at implementing these ideas into new products, services and processes. Companies, therefore, are the key driver of the innovation process. In assessing companies capacity to innovate, DIW analyses four areas: the degree of penetration of innovative products and services on world markets, networking within industry itself and with higher education and research establishments, the business innovation culture and the R&D activities of companies. In the overall ranking, Swedish companies come out top, followed by their Japanese and Finish competitors (see chart). German companies rank 7 th. The relative difference in real terms between them and the first six places is illustrated by the actual scores: with just under 1.4 points behind, Germany is still well up at the top of the group. Success on World Markets. Every year, the media awards Germany the title export world champion. DIW also testifies to German companies global competitive position. The innovation indicator focuses on the production and sale of R&D-intensive products and services and also on the foreign trade balance. German companies rank third, with a score of 6.2 points. At the top of the league are Irish and Swiss companies. US and Swedish companies rank 4 th and 5 th. German companies lead the field worldwide in high tech. This sector of industry includes areas such as mechanical, automotive and chemical engineering. Ranking 6 th in the knowledgebased service sector, which includes fields such as healthcare and financial services, IT and telecommunications, German companies are still close on the heels of the leaders in the field. Ranking only 8 th however, the performance of German companies is not quite so strong in the field of cutting-edge technology, which includes fields of business that invest heavily in R&D, such as the pharmaceutical industry or media technology. According to DIW, one of the main reasons why German companies are so successful with their products is that competition on the home markets is so keen compared to that in other countries. German companies also benefit from having well developed, high-quality infrastructure at their disposal. Teamwork Pays! Good teamwork pays off especially in the innovation process. This is because a whole range of skills and knowledge is required to develop and implement sophisticated new products. Companies that work together with others, exploit external research resources, and liaise closely with higher education establishments often have significant advantages over their competitors in innovating. DIW therefore includes a networking indicator. This rates the extent and quality of collaboration at the various locations of innovation. A number of factors are taken here into account: the degree of inter-company networking, alliances with suppliers and customers, knowledge transfer between research institutes and industry and also the distribution of clusters, the networks that are concentrated in a particular region. Networking works best in Japan, which heads this particular field. Germany is in second place, thanks to the strong ties among companies and to higher education and research establishments. Switzerland, the US and Sweden follow in third to fifth place. 6

7 Early Education Secondary Schools Universities Innovation Innovative Culture: Promoting Talents. An International Comparison of the Innovative Capacity of Companies. Place Score For a company to develop and successfully implement new ideas, it is important that it uses its human resources effectively, promoting their talents and making the most of their skills. How effectively companies in the countries involved in the study use this innovative potential is summed up by DIW under the heading of Innovative Culture. DIW first examines the extent to which companies are involved in the ongoing training of the workforce. Then, the management culture is reviewed, taking aspects into account such as the capability of management to delegate to the right extent and foster a performance-oriented atmosphere based on trust and team spirit. Danish companies score top in this area. Places 2 to 5 go to Sweden, Switzerland, Finland and the US. German companies come in 11th, scoring particularly poorly in the area of ongoing training. 1 Sweden 2 Japan 3 Finland 4 Switzerland 5 USA 6 Denmark 7 Germany 8 UK Austria Ireland Netherlands Canada Belgium France Korea Spain Italy 1.00 Sources: Original data WEF; OECD, EUKLEMS, GEM; calculations by DIW, Berlin Research and Development: Investment in the Future. For the innovative products and services of tomorrow to reach the market, intensive research and development (R&D) is crucial. DIW measures the extent to which companies in the various industrialised countries invest in R&D based on the volume of corporate R&D expenditure on the one hand and on the percentage of staff employed in R&D departments on the other. Swedish companies come out top, followed by companies in Finland, Japan, the US and Korea. Germany companies are in 8 th place. For a company to develop and successfully implement new ideas, it is important that it uses its human resources effectively. 7

8 Shaping the Climate, Promoting Innovations. The State. Consistently top performance in manufacturing and technology can only be achieved with a large number of highlyqualified people. Overall Score for Innovation Policy. Place Score 1 Switzerland 2 Sweden 3 Finland 4 USA 5 Denmark 6 UK 7 France 8 Netherlands 9 Canada 10 Germany 11 Japan 12 Austria 13 Belgium 14 Korea 15 Ireland 16 Spain Italy 1.00 Best Innovation Policy in Switzerland. The extent to which society and companies can be innovative depends largely on government policy. According to DIW, the state greatly influences the innovative capacity of a country with four areas of activity: how it shapes the education system, its R&D policy, the degree of state regulation and the fight against corruption, and state demand for innovative products and services. Innovation indicator shows that the gold medal for innovation policy goes to Switzerland. Silver and bronze go to Sweden and Finland. Germany takes 10 th place. Its score of 4.59 illustrates the extent of the gap between Germany and the three top places, but also shows that Germany has a clear lead over worst-placed Spain and Italy Education: The Basis for Innovative Capacity. Consistently top performance in manufacturing and technology can only be achieved with a large number of highly-qualified people. Education is therefore a key factor in determining the innovative capacity of a country. The innovation indicator evaluates the education systems of the countries involved in the study based on four criteria: educational expenditure, the current and future number of qualified workers with a university education, the quality of primary, secondary and tertiary education and, as previously mentioned, the extent to which companies are involved in further training. The country with the highest level of education is Switzerland, followed by the US, Denmark, Finland and Sweden. The innovation indicator paints a picture of Germany which has been confirmed by a number of previous studies: Germany has major deficiencies in all four of the areas analysed. Overall, Germany takes 13 th place, lagging clearly behind the top runner by 3.5 points. R&D Policy: More than Just Investment. How do you measure the success of R&D policy? DIW focuses primarily on three indicators: Firstly, state promotion of R&D, which includes the total volume of state expenditure on R&D and the tax concessions granted to R&D. Secondly, the extent to which state-owned research and higher education establishments liaise with industry. Thirdly, the quality of basic research, which is evaluated in the innovation indicator based on the number of publications in scientific and technical journals and the frequency of references to them. Sources: Original data WEF, OECD, NSF, Transparency International, university rankings; calculations by DIW, Berlin. 8

9 Early Education Secondary Schools Universities Innovation In R&D policy, Sweden comes out best. Places 2 to 5 are taken by the US, Switzerland, Finland and the UK. Germany is in 7 th place, with its greatest strength in this area being the networking capability of higher education and research establishments with industry. State Regulation: A Frequent Brake on Innovation. Inflexible recruiting regulations, long-winded approval processes for start-ups or in introducing new products, extensive liability rules these are just some of the many rules and regulations that can make an innovator s life difficult. On the other hand, regulation is not always synonymous with bureaucracy and paper mountains when it comes to innovation. It can actually foster the process of innovation and steer market developments in a particular direction, like in the case of the renewable energy debate. The economists from DIW use a comprehensive set of data compiled by the OECD to examine the extent to which the countries involved in the study manage to achieve the right level of state regulation to enable new products and services to be developed and marketed as smoothly and efficiently as possibly. Based on studies carried out by Transparency International, the same sub-indicator includes the degree to which the industrialised countries are successful in the fight against corruption. The results: top of the league is Denmark, followed by the UK, Sweden, Finland and Switzerland, with Germany only managing 14 th place. State Demand Stimulates Innovation. Companies rate a high level of demand for new products, technologies and services as one of the key factors influencing the development and implementation of innovations in a particular location. This is illustrated by two studies of companies that DIW performed together with the Federation of Germany Industries (BDI) as part of the innovation indicator report. To determine demand for innovations, DIW focuses in particular on the percentage of total demand for industrial products accounted for by R&Dintensive goods as well as the per capita level of demand for knowledge-based products and services. Particular emphasis is placed on state demand, because the state is often the most important client especially in the field of futureoriented cutting-edge technologies. In international comparison, Germany ranked well in terms of state demand, taking 3rd place together with the US and France, behind the leaders Japan and Switzerland. If the overall demand for innovation is taken into account to include consumer and industrial demand as well, Germany ranks poorer in 8 th place. Top of the league are the US, Switzerland, Ireland, Sweden and Japan. Regulation is not always synonymous with bureaucracy and paper mountains when it comes to innovation. 9

10 Daring to Innovate, Securing the Future. Society. The more open-minded the people of a country are towards breakthroughs in science and technology, the better it is for the overall social climate of innovation. Creating innovations means having the courage to attempt change. The Finns Particularly Innovative. The capacity to innovate is not only determined by economic and political factors but also to a large extent by the attitudes and patterns of behaviour of the people in the countries concerned. These are analysed in detail in the innovation indicator, including the propensity to take entrepreneurial risks, how open society is to new developments in science and technology, and the degree to which women are involved in the innovation process. The innovation indicator illustrates the following: the Finns are the most innovative nation, followed by the Swedes and the Americans. The Germans take an unflattering 11 th place. According to DIW, the biggest obstacle to innovation in the Federal Republic of Germany are the attitudes of the people, ranking 13th. Their behavioural patterns rank little better in 11 th place. Pioneering Spirit Wanted. Creating innovations means having the courage to attempt change. This is a characteristic of entrepreneurs. They seize opportunities to achieve success with new products, services or business ideas. The degree of entrepreneurial spirit differs from country to country, as is illustrated by the results of the Eurobarometer survey conducted by the EU Commission and other analyses on which the indicator is based. When asked whether they would set up a company when there is a realistic chance of failure, whether they prefer to be in steady employment or self-employed and whether they would prefer to buy an existing company or set up a new one, it is the Irish who prove to be the greatest risktakers. The Koreans, Americans, Canadians and the Spanish, in places 2 to 5, are also least afraid of taking the plunge into self-employment. The Germans only manage second-last place. The great need for security among people in Germany is also reflected by the actual number of companies set up there. Although Germans are better at putting business ideas into practice than they are at taking risks, their score in doing so (11 th place) is not much better either. It is the Koreans who become self-employed most frequently, followed by the Americans, who are particularly famous for it, the Canadians, the Irish and the Swiss. The fact that relatively fewer companies are set up in Germany than elsewhere may be connected to a further shortcoming: external sources of finance. This important source of venture capital so crucial to innovative start-ups is much less readily available to companies in Germany than in the majority of other countries. In particular Sweden, the US, the UK, Canada and Denmark are able to score points in this area. Participation of Qualified Women. As part of the World Values Survey, carried out regularly worldwide, people in a number of countries were asked about their attitudes to women and work. The study showed that the Germans are less open-minded when it comes to this topic than their counterparts in other industrialized nations. Women s rights to equality in the workplace are more strongly advocated in 11 countries than in Germany. The least biased are people in the Scandinavian countries of Denmark, Sweden and Finland and also in the US and the Netherlands. 10

11 Early Education Secondary Schools Universities Innovation The actual level of female participation in the innovation process paints a similar picture. At the top of this particular league we find the three Scandinavian countries Finland, Sweden and Denmark, followed by France and Ireland. Germany is in 14 th place. To measure the level of female participation in innovation, DIW researchers analyse, on the one hand, the proportion of qualified women involved in science, business and politics. They also take into account the ratio of men to women among the workforce and the differences in what men and women earn. In addition, emphasize is placed on the upcoming generation available for innovations, based on the proportion of female maths, science and engineering graduates. In almost all areas, the Scandinavian countries prove to be particularly progressive, while Germany lags behind. Innovative Capacity of Society. Place Score 1 Finland 2 Sweden 3 USA 4 Korea 5 Denmark 6 Netherlands 7 Canada 8 UK 9 Ireland 10 France 11 Germany 12 Belgium 13 Switzerland 14 Italy 15 Japan 16 Spain 17 Austria Openness to Technology Promotes Innovation. The more open-minded the people of a country are towards breakthroughs in science and technology, the better it is for the overall social climate of innovation. The attitudes of the people towards innovations are analysed by the DIW researchers using the results of the Eurobarometer survey and relevant surveys in non- European countries. They examine the future benefits and risks that people associate with new scientific and technological developments. The results highlight a remarkable contradiction which is particularly apparent in Germany. Many people think that innovations make their life easier and healthier, work more interesting and create better opportunities for future generations. Yet at the same time, they associate innovations with risks and negative expectations. Only 46 per cent of the people in Germany consider innovations to bring more advantages than disadvantages. In the US, by contrast, this figure is 84 per cent. Germany Sources: Original data WVS, WEF, Eurobarometer, NSF; calculations by DIW, Berlin. ranks 7th. The US, Denmark, Sweden, Korea and the Netherlands lead the field. What people know about innovative technologies and products was also examined in the innovation indicator. To test their knowledge, people were asked, for example, in the surveys analysed whether antibiotics had the same effects on viruses and bacteria. The most knowledge is demonstrated in Finland, followed by Sweden, Switzerland, Denmark and the Netherlands. Germany comes 8th. More Information In addition to the information contained in this summary, the full version of the Innovation Indicator for Germany 2007 report contains a number of additional aspects of the international competition to innovate. These include a detailed analysis of developments since 1995, the issue of whether there are groups of countries with similar innovation profiles, a close look at four large federal states in Germany and at the innovative capacity of China. These topics are covered in the full report, which is available only in German (see: 11

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