Lack of Qualified Personnel Becomes a Major Barrier to Innovation

Skills shortages are stifling the innovative potential of German companies. This effect is particularly pronounced among companies experiencing a lack of vocationally trained workers, forcing many companies to abandon innovation projects. There is a particularly high demand for professionally trained specialists in the areas of production and IT. On the other hand, a lack of academic staff is less often to blame for the failure of innovation projects. If the German economy is to maintain its capacity for innovation, policymakers and businesses will have to invest more heavily in vocational training. 

The study was conducted jointly by ZEW Mannheim and Professor Jens Horbach from the Augsburg University of Applied Sciences on the basis of data collected between 2017 and 2019 as part of the German Community Innovation Survey (CIS). The study shows that innovative companies are particularly affected by the lack of skilled workers, with 43.8 of the most innovation-intensive businesses reporting skills shortages. In the overall economy, this share amounts to 39.6 per cent of businesses.

The skills shortage is much more pronounced in innovation-intensive companies, as they are particularly dependent on qualified professionals. At the same time, the lack of qualified professionals also limits the scope for further innovation. As the study shows, firms faced with a shortage of vocationally trained workers are more likely to abandon innovation projects. Companies with a high share of employees with an academic degree, on the other hand, are less likely to experience difficulties finding suitable candidates for their vacancies. These companies are also less likely to abandon innovation projects when experiencing a lack of academic staff. This indicates that the shortage of professionals in academic occupations is less of a hindrance to innovation activities, because these companies seem to have better procedures in place to deal with scarce labour supply, e.g. contacts to university professors.

The study also shows that companies engaging in a broad range of innovation activities usually post openings for staff with different qualification levels. The same is true for companies that have experienced a skills shortage in the past. “We are currently witnessing a technological change. In order to respond to this change, different skills will be needed,” says Dr. Christian Rammer, deputy head of the ZEW Research Department “Innovation and Industrial Dynamics” and co-author of the study. “It is not enough to just increase the number of students at universities. Vocational skills are also crucial for a firm’s innovative potential. The German economy will need the right combination of both academic and vocational qualifications to drive forward innovation.”

A major obstacle for innovative processes is the shortage of vocationally trained workers in the areas of production and information technologies. “It is vital to increase social recognition and financial incentives so as to encourage more people to choose a vocational education in these areas,” concludes Rammer. “Policymakers will have to implement measures to offset the negative effects skills shortages have on the innovation activities of companies. This is the only way to ensure future productivity growth, and therefore also greater prosperity.”