International Knowledge Boosts Firm Innovation
Research
26.08.2024
ZEW Study on Innovation through Knowledge Imports
The value of imported knowledge services to Germany, such as research and development (R&D) or patents, has more than doubled over the last decade. It grew from around 16.9 billion USD in 2010 to over 46 billion USD in 2022, as calculated by ZEW based on figures from the World Trade Organization (WTO). This makes Germany one of the world’s largest importers of knowledge. However, small and medium-sized enterprises (SMEs) have yet to fully exploit this potential. This is the result of a recent analysis by ZEW Mannheim.
“In light of increasing protectionism and the pursuit of technological sovereignty, it is advisable to focus on reliable partner countries, such as those within the EU, when importing knowledge. German economic policy should aim to eliminate remaining trade barriers for knowledge imports within the Single Market,” recommends Dr. Bastian Krieger, author of the study and head of the Junior Research Group “Co-Creation” in ZEW’s “Economics of Innovation and Industrial Dynamics” Unit.
Importing firms are twice as innovative
Access to international knowledge, through patents, licences, or R&D, significantly enhances the success of innovations in Germany. Firms that import knowledge are 68 per cent more likely to introduce new or significantly improved products, services, or internal processes. This is more than double the rate of non-importing firms, which stands at 33 per cent.
EU countries are the most important import partners
The share of knowledge imports to Germany from EU Member States is increasing. In 2010, around 35 per cent of knowledge imports came from the EU; by 2019, this figure had risen to 44 per cent.
This trend is in line with a 2021 recommendation from the German Federal Ministry of Education and Research (BMBF), which advised focusing international cooperation on selected countries for the development of key technologies. This strategy aims to strengthen technological sovereignty and resilience against global challenges.
“The EU is playing an increasingly important role in the knowledge imports of German firms. Our study shows that the BMBF’s strategy aligns with historical trends. While knowledge imports should not be halted, the source countries should be carefully chosen, and the EU offers comparatively reliable partners,” Krieger adds.
SMEs have little participation in knowledge imports
However, the study also reveals that large firms are primarily responsible for international knowledge imports, while SMEs rarely acquire knowledge and technologies from abroad.
“We observe that SMEs are hardly involved in international knowledge imports. The exact reasons for this need further investigation to better exploit their potential. If SMEs were to import more knowledge and technologies, their innovations would likely be more successful, leading to cost reductions through better processes and increased revenues from more innovative products and services. This could result in significant innovation gains for the German economy. However, this potential is currently underutilised,” Krieger estimates.
What are knowledge imports?
There are various forms of knowledge imports, ranging from R&D services to patents and licences from abroad.
The ZEW policy brief by Bastian Krieger analyses the impact of knowledge imports on the innovative capacity of German firms on the basis of various studies and statistics and draws policy implications from the results.
