Technology and Knowledge-Intensive Start-Ups in Germany: Increasing Number of Start-Ups - High Technology Remains a Problem Child

An examination based on the most recent available data on start-up activity in Germany shows that in 2003, the number of new firms in technology and knowledge-intensive sectors (see definition at the bottom of the text) increased by about four percent compared to the previous year.

However, high-technology remains the problem child of the start-up balance in technology and knowledge-intensive sectors. Here, the number of newly founded firms has continued its decline by falling four per cent in 2003. These are the findings of the latest survey on start-up activities carried out by the Centre for European Economic Research (ZEW) in Mannheim.

With eleven per cent, start-ups in technology and knowledge-intensive sectors only make up a small proportion of all business start-ups in Germany. However, high hopes rest upon them. Due to their impulses regarding new problem solutions that lead to innovative and internationally competitive products, they are expected to create new, sustainable jobs and strengthen the competitiveness of the German economy in the global market.

A closer examination of the start-up activities in the technology and knowledge-intensive sectors presents a much different picture: In 2003, the number of high technology start-ups in the technology-intensive sectors, i.e. companies with an R&D-intensity (=R&D minus revenues) of more than 8.5 per cent, has continued the downward trend of the previous years. At the same time, high-quality technology start-ups, i.e. companies with an R&D-intensity of between 3.5 and 8.5 per cent, have recorded a strong growth of nine per cent as compared to the previous year. With regard to the total number of start-ups in the technology and knowledge-intensive sectors, this considerable growth is far less effective than the three per cent increase in newly-founded technology-based service providers like e.g. data processing providers. This is due to fact that the number of technology-based service providers exceeds by a multiple the number of companies in the technology-intensive sectors of the manufacturing industry.

With an increase of four per cent, the number of start-ups in the knowledge-intensive sector, e.g. tax consultants, accountants, or management consultants, has also developed positively in 2003. They have thus contributed considerably to the rebound in start-up activities in the technology and knowledge-intensive sectors. However, the anticipated recovery business start-ups in the advertising industry, which recorded a decrease of more than 25 per cent in 2002 as compared to 2000, failed to materialise. On the contrary, in 2003 the number of start-ups has once again decreased by six per cent as compared to the previous year.

Definition: Knowledge and technology-intensive companies

Knowledge and technology-intensive companies are businesses of the manufacturing industry with an R&D-intensity (=R&D minus revenues) of more than 3.5 per cent as well as technology-intensive service providers (e.g. telecommunications service providers, data processing services, R&D service providers, architects and engineers) and knowledge-intensive service providers (e.g. legal consulting, auditing, tax advice, market and opinion research, management and PR consulting as well as advertising).

Contact

Dr. Georg Metzger, E-mail: metzger@zew.de

Dr. Diana Heger, Phone: +49(0)621/1235-382, E-mail: heger@zew.de