Innovations in Manufacturing Industry: Small and Medium-Sized Enterprises Give away Chances of Success

Even though small and medium-sized enterprises with less than 500 employees (SMEs) represent the lion's share of companies in manufacturing industry that invests in new and improved products and production processes, their innovation success clearly falls behind that of large enterprises.

This was found in the latest innovation survey that the Centre for European Economic Research (ZEW), Mannheim, conducted by order of the Federal Ministry for Education and Research (BMBF).

In 1999, the ZEW interviewed approximately 2,500 enterprises about their innovation activities and projected the results for Germany. According to ZEW calculations, companies in the German manufacturing industry and mining have increased their investments in new or improved products or production methods from 104 billion DM in 1997 to 109 billion DM in 1998. The share of innovative companies in all enterprises in manufacturing industry and mining has increased steadily since its low point in 1994. Since the ZEW started its Innovation Survey in 1992, this share reached its highest level in 1998 with 66 percent. This signifies that nearly 41,000 companies have modernised or improved their products or production processes. Consisting of 39,000 companies, SMEs account for the largest share of innovative enterprises. In 1998, SMEs generated approximately 30% of their turnover with product innovations that were introduced in the past three years. In contrast, the average of all innovative companies in manufacturing industry and mining is about one third higher (40 percent). This difference - after all, SMEs represent the overwhelming majority of all innovative companies in manufacturing industry - is mainly due to the fact that SMEs gear their innovations towards what is technically feasible and do not consider the wishes of their customers sufficiently. Not everything that is technically feasible can be successfully sold. In order to solve this problem companies should orient themselves to a larger extent towards the market. Innovation support granted by the federal state can also contribute to the solution. This holds true particularly for direct, but also for indirect innovation support (for instance by reducing the tax load on innovation activities).

Contact

Dr. Norbert Janz, E-mail: janz@zew.de