Germany’s Position in the Field of ICT Less Satisfying

In separate niche markets and regarding certain technologies, companies of the German ICT economy (manufacturers and providers of information and communications products and services) take the international lead and do excellent research. Compared to other countries, however, the positioning of Germany in the field of ICT seems less satisfying due to the small size of the German ICT economy in spite of its great potential.

In Germany, only 14 per cent of the entire industrial R&D expenditures are spent on ICT – less than in almost any other industrial nation. At 15 per cent, even the proportion of patent applications is very small. Therefore, the high growth potential of the German ICT economy contributes less to the added value and employment than in other countries.

Apart from the tough price competition, one main reason for the rather small range of the German ICT economy lies in the domestic market, where ICT innovations often catch on very hesitantly. This is partly due to the population’s insufficient ICT skills. It is thus inevitable for the future to invest in the ICT skills of the working population to improve the international position of the German ICT economy. These are the findings of a study conducted by the Centre for European Economic Research (ZEW), the Fraunhofer Institute for Systems and Innovation Research (ISI) and the Institute for Economy Research of Lower Saxony (NIW).

The ICT economy as an economic key sector is exceptionally heterogeneous. It is on the one hand characterised by technological top products with high demands on the innovation potential such as high quality computer chips or complex software and on the other by standardised bulk products like consumer electronics and mobile phones, of which the international success depends on price advantages and quick model changes. Especially Asian emerging countries, which are catching up economically, take advantage of this heterogeneity. They have established a firm position in areas with a high standardisation potential. China, for example, is the world’s largest ICT exporter today.

The fierce price competition due to the emerging countries led to the fact that in Germany, virtually just those manufacturers who have successfully occupied an innovation niche have persisted. Even in future times, ICT hardware will probably not offer much scope for German companies.

However, this does not apply to software. German computer scientist and software engineers have caught up over the past years and have established an internationally strong position. The situation of the so-called embedded software, i.e. control programmes directly connected to goods and products, is very similar. The successful development and the consequent use of this new ICT form in industries where Germany has traditionally been strong (particularly in mechanical engineering and car manufacturing) largely helped to improve the supply of goods and services as well as the production processes in these very industries that are of great importance for the German economy.

In spite of these successes, the overall positioning of Germany in the field of ICT cannot be called satisfying because the German ICT potential is still by far not used to its possible extent yet. A significant obstacle for the German ICT service providers is the domestic market taking on new ICT applications only hesitantly. Other nations such as Sweden, Finland and Denmark as well as Italy and Spain prove more willing to use ICT at an early stage. The use of the internet and mobile phones is much more common. This is crucial for the success of numerous other products and services that are transmitted through these media. The reasons for Germany’s inferior position in terms of spreading ICT are higher usage fees and the low level of competition between different technologies. In contrast to many other countries, Germany has not yet taken on the principle of internet access via cable modems. The hesitancy of the output market also partly explains why the foundation of companies in the German ICT economy progresses rather slowly.

In order to give a boost to the German ICT economy it is important to make fuller use of the ICT potential and to support the fusion of the ICT sector with other technological areas. New ICT trends need to be taken up more rapidly. In this context, intensive competition, also on the part of telecommunications infrastructure providers (broadband access) might be helpful as it would entail lower prices. Furthermore, the public sector should take a leaf from other countries and be more active regarding their online offer of public services.

Another important reason for the weak supply and the hesitant acceptance of ICT is probably the lack of ICT skills among employees and the population in general. In the course of their professional and academic training, these people are not confronted with ICT often enough. Furthermore, it is not very likely that in the foreseeable future, the vocational education system and universities will train enough professional ICT specialists. It is thus necessary to make additional investments in the ICT skills of the working population.

Contact

Dr. Christian Rammer, Phone: +49/621/1235-184, E-mail: rammer@zew.de