Digital Sovereignty: German Companies See Need for Action
Research
21.10.2024
ZEW Study for the BMWK Highlights the Perspective of German Companies on Digital Sovereignty
A new study from ZEW Mannheim on behalf of the Federal Ministry for Economic Affairs and Climate Action (BMWK) shows that, while German companies recognise the importance of digital sovereignty, they also acknowledge a strong dependency on non-European providers and partners, especially from the United States. The study, which is based on a representative survey of 1,200 companies in the information economy and the manufacturing industry, sheds light on Germany’s current challenges regarding digital sovereignty. The term ‘digital sovereignty’ refers to the ability to shape the digital transformation in terms of hardware, software, services and competencies in a self-determined way. In terms of digital technologies and applications, this means being able to decide for oneself how dependent one wants to be on providers and partners.
“The survey shows that, for the success of a company, digital sovereignty is regarded as important or extremely important by about half of the companies in the information sector as well as those in the manufacturing industry. For both manufacturing and the information economy, the most commonly cited attributes relevant to digital sovereignty are data sovereignty and the interoperability and modularity of IT systems,” explains Professor Irene Bertschek, head of ZEW’s “Digital Economy” Research Unit and co-author of the study.
Dependencies in key digital technologies
“More than 80 per cent of companies in each of the two economic sectors stated that they feel reliant on non-European providers or partners in at least one of the technological fields mentioned in the survey. Most frequently, participating companies indicated a dependence on non-European providers and partners in the domain of software and applications,” comments Dr. Daniel Erdsiek, co-author of the study and researcher in ZEW’s “Digital Economy” Unit. Other frequent dependencies include hardware and infrastructure, IT security technologies and digital platforms. Dependencies in the domain of artificial intelligence (AI) were also acknowledged by the companies in the survey, especially in the information economy. For example, 52 per cent of companies in the information economy indicated that they feel at least somewhat reliant on non-European providers and partners when it comes to generative AI (e.g. ChatGPT).
Lack of European alternatives and technological superiority are reasons for dependencies
With a share of 82 per cent of companies in the information economy, the lack of European alternatives is the most commonly named reason for existing dependencies on non-European providers and partners. Additionally, almost three quarters of companies view the technological superiority of these providers as a reason for their reliance on them. In the manufacturing industry, this ranking is reversed, with 74 per cent of companies pointing to the technological superiority of the providers as a reason for their reliance, while 70 per cent named the lack of European alternatives. Furthermore, both sectors are experiencing the issue of high technological barriers to change, also known as lock-in effects. About 58 per cent of companies in the information economy sector provided this as a reason for their existing reliance on non-European partners. This is double the figure from 2021.
Concerns about potential future dependencies on China
Companies in both the information economy and the manufacturing industry paint a similar picture regarding their dependencies on providers and partners in specific countries. At present, companies are primarily reliant on providers and partners from the United States. Dependence on providers and partners from China and other non-European countries is currently still limited. However, the majority of companies expressed concern that dependencies on Chinese companies could potentially emerge. Some 46 per cent of companies in the information economy indicated significant concern that they will become reliant on Chinese providers and partners in the future. In the manufacturing industry, this figure amounts to 50 per cent.
“The study shows that, as before, the companies attach high importance to digital sovereignty, especially regarding the long-term success of the German and European economies. That’s why it is crucial for policymakers to create incentives through regulatory frameworks so that innovative digital solutions can be developed and applied in Germany and in Europe as a whole. Close attention is currently being paid to the recently adopted AI Act. The extent to which AI solutions developed in Germany or in Europe will be successful on national and international markets will depend not least on their implementation,” says Irene Bertschek.
About the study
Based on a representative survey of 1,200 companies in the information economy and the manufacturing industry, the study shines light on the technology subfields in which German companies perceive themselves to be reliant upon non-European providers and partners. It also examines what the causes for this are and how companies assess their own dependencies as well as those of the German and European economies as a whole. By comparing the current results with a similar survey from 2021, the study additionally facilitates assessment of the degree to which company-relevant factors have developed in the realm of digital sovereignty.
The study is a part of the project commissioned by the Federal Ministry for Economic Affairs and Climate Action titled “Entwicklung und Messung der Digitalisierung der deutschen Wirtschaft am Standort Deutschland” (“Development and Measurement of Digitalisation of the German Economy in Germany”).
