Taking the Lead in Innovation – A Crucial Success Factor for the Internationalisation of German ICT Companies

Innovation, skilled employees and customised products and services are the success factors of German ICT (Information and Communication Technology) companies for accessing foreign markets. These are the findings of a study conducted by the Centre for European Economic Research (ZEW) on behalf of the Federal Ministry of Economics and Technology (BMWi). The study represents the preparatory work for the 6th National IT Summit on December 6, 2011, in Munich. It analyses the key intentions, success factors and problems regarding the internationalisation of German companies from the ICT sector. The study includes a representative survey of approx. 600 ICT businesses.

The key condition for a company’s successful internationalisation is the lead in innovation of its products and services. With 21 per cent the export quota (share of export turnover in total turnover) of innovative ICT companies is significantly higher than the export quota of non-innovative ICT companies, which stands at only 5 per cent. In addition to that, large and innovative companies have more branches abroad than non-innovative ICT companies.

Other critical factors for success abroad include highly skilled employees and a target market-specific customisation of products and services.

With this internationalisation, German ICT companies mainly aim at expanding into new markets, keeping up with competing businesses and supporting domestic clients’ activities abroad. The reduction of costs only plays a minor role.

The high costs of expanding into new markets and a lack of demand for their products and services represent the most significant obstacles for ICT companies entering international business or wishing to intensify their international activities. Companies already operating abroad regard product piracy and a lack of protection of intellectual property as the most significant barriers.

To support the internationalisation of ICT companies, economic and innovation policy can initiate activities on different levels:

• Innovation activities in the ICT sector can be promoted by government support of research and development. This can be a crucial factor for initiating foreign operations.
• Facilitated access to financing and credits can help companies bear high entry costs in foreign markets.
• Improvements of the legal framework, such as effective legal protection abroad, enhance legal certainty.
• Government consulting services should especially offer support for very small ICT companies, as this group faces internationalization barriers more frequently than other firms.

For further information please contact

Prof. Dr. Irene Bertschek, Phone +49 621 1235-178, E-mail bertschek@zew.de  

Jörg Ohnemus, Phone +49 621 1235-354, E-mail ohnemus@zew.de