Artificial Intelligence Makes German Companies More Innovative and Profitable
ResearchStudy by ZEW Mannheim on Behalf of BMWi
German companies achieved a turnover of more than 7.6 billion euros with world market innovations in artificial intelligence (AI) in 2018. As a result, this form of technology accounts for approximately ten per cent of German turnover of world market innovations, according to a study conducted by ZEW Mannheim on behalf of the Federal Ministry for Economic Affairs and Energy (BMWi). The turnover achieved by these companies does not, in fact, increase as a result of these businesses using artificial intelligence. However, AI has an evident impact on the return on sales which stands at 6.4 per cent – 1.3 percentage points higher – purely through the use of this technology. Companies that use AI are therefore able to yield profits of around 25 per cent.
As well as increasing economic output, artificial intelligence also boosts innovation levels within the German economy. “Artificial intelligence makes it easier for companies to create ambitious innovations with a high degree of novelty,” says Dr. Christian Rammer, deputy head of the ZEW Research Department “Economics of Innovation and Industrial Dynamics” and author of the study. The use of artificial intelligence increases the number of German companies who develop world market innovations by almost four per cent. This is despite the fact that only a small proportion of German companies, approximately six per cent, use AI applications at all.
Artificial intelligence stimulates employment
Contrary to its often suspected negative impact on employment, artificial intelligence actually creates more jobs. According to the study, approximately 48,000 jobs have been created in the German economy through the use of AI. “We have not seen artificial intelligence replacing employees in companies. As a matter of fact, the use of AI actually stimulates employment,” Dr. Christian Rammer adds. “We observe employment growth particularly within small to medium-sized companies. Presumably these firms hire specialists to be able to deploy artificial intelligence in the first place.”
The significance of AI applications should not be underestimated, as they give the German economy a major competitive edge. Companies that use artificial intelligence are not only more innovative, but they also yield higher profits for the same amount of turnover and create a considerable number of additional jobs. Companies who invest in AI today are cementing the foundation for a profitable and promising future as well as increasing the competitiveness of the German economy at the same time.
Background on the study
The study is part of a comprehensive research project on digitalisation, which has been undertaken on behalf of the Federal Ministry for Economic Affairs and Energy with an initial duration of three years. The project, which is entitled ‘Measuring the degree of digitalisation in the German industry’ is conducted by a consortium formed by ZEW Mannheim (consortium leader), the Cologne-based German Economic Institute (IW), IW Consult, the Institute for Industrial Management FIR at RWTH Aachen University, and the German Institute for Economic Research (DIW).
On the method
The study is based on ZEW’s long-standing expertise in the observation und analysis of issues relating AI and feeds on representative data from the Mannheim Innovation Panel (MIP) from the year 2019. In the study, artificial intelligence was classified into the following categories: speech comprehension and image recognition, machine learning, and knowledge-based systems such as cognitive modelling. In addition to this, the areas of application of each respective process were determined. Companies cited ‘products and services’ as well as ‘process automation’ as the most common areas of application.
