Innovation Spending in Germany at Record Level
Research
27.01.2025
Innovation Survey 2024: Innovation Activity in the German Economy
In 2023, the German economy spent a record 203.4 billion euros on innovation, thus exceeding the previous year’s level by 6.6 per cent. The service sector in particular makes an above-average contribution to this development. Even so, innovation planning for the years ahead remains marked by uncertainties, according to the new 2024 Innovation Survey by ZEW Mannheim on behalf of the Federal Ministry of Education and Research (BMBF).
Cem Özdemir, Federal Minister of Education and Research, explains: “Germany is a country of innovation, the new survey shows this. We have a tradition of innovation. It’s very gratifying that companies were able to increase their innovation spending again. The share of turnover spent on innovation showed a positive trend as well and was higher than in the previous year. It’s also good that the proportion of companies that drive new ideas and innovations has been stable. But we need to recognise the declining share of market novelties in turnover as a warning sign. We have to maintain our innovative edge, and this requires courage and support. In order to encourage small and medium-sized enterprises (SMEs) to invest more in research and innovation, we have improved the tax incentives for research activities. I’m happy to see that SMEs considerably increased their spending on innovation. The growth rate is almost as high as that for large companies.”
“The findings underline that, despite the challenging economic environment, German companies focus on innovation to remain competitive. The increased innovation spending observed in the service sector is especially remarkable and reflects the structural change towards innovative services,” explains Dr. Christian Rammer, deputy head of ZEW’s “Economics of Innovation and Industrial Dynamics” Research Unit. “We observe an increase in investments although innovation planning is associated with considerable uncertainty.”
Service sector sets the course for innovation
As in previous years, innovation activity continues to shift towards services. Innovation spending in the service sector climbed by 9.8. per cent and thus more strongly than in the industrial sectors where spending increased by 5.4 per cent. However, at 145.1 billion euros, the level of innovation expenditure in the industrial sector was two and a half times higher than in the services sector (58.3 billion euros).
Large companies with 250 or more employees account for the major share of innovation spending: In 2023, they invested 170.8 billion euros for innovations, which corresponds to an increase of 6.7 per cent over the previous year. Innovation spending by SMEs in 2023 was 32.6 billion euros. Compared to the previous year, their spending grew by 6.3 per cent, i.e. at a similar rate as for large companies.
Heterogeneous picture of data use
The systematic use of data has become a key factor for innovation and efficiency in Germany. According to the current ZEW study, 34 per cent of companies use specific data-based approaches to optimise internal processes and improve their offerings. One type of use is particularly widespread: 29 per cent of German enterprises systematically collect and analyse internal process data. However, only a marginal proportion of companies use data for commercial purposes: Just two per cent of enterprises purchase external data records and only one per cent sell their own data to third parties.
A crucial factor for the successful use of data is the availability of the required expertise. While around one third of the companies have an infrastructure that is compliant with data protection regulations, only twelve per cent employ specialist data scientists. There is a direct relationship between data use and innovation: In the group of companies that actively pursue innovation activities, 46 per cent use data systematically, whereas in the group without innovation activities the share is only 17 per cent.
About the ZEW Innovation Survey
ZEW Mannheim, in cooperation with the Institute for Applied Social Sciences (infas) and the Fraunhofer Institute for Systems and Innovation Research (ISI), collects data on the innovation activities of German companies every year on behalf of the BMBF. The study considers companies with five or more employees. In 2023, these were around 332,000 companies.
