Technology and Knowledge-Intensive Start-Ups in Germany: Number of New Businesses Increasing - No Turnaround in Advanced Technology Sector

In 2004, the number of start-ups in the technology and knowledge-intensive branches in Germany grew by five per cent compared to the previous year.

This increase is mainly based on the development in the technology and knowledge-intensive services sectors, which constitute a major part of the technology and knowledge-intensive branches regarded. In 2004, the services sectors recorded start-up numbers that were slightly more than five per cent higher than in the year before. By contrast, the 2004 number of high-tech start-ups in the manufacturing industry has increased by merely two per cent compared to the previous year and still hovers at a very low level following years of decline. These are the major findings of the current Start-Up Report published biannually by the Centre for European Economic Research (ZEW) in Mannheim.

In the high-tech branches of the manufacturing industry, particularly the number of advanced technology start-ups including the production of process control systems, data processing equipment or electrical components has developed in a restrained manner. In 2004, the number of new businesses in this branch grew by almost two per cent compared to 2003. This development does not yet mark a perceptible turnaround, but rather a low-level stagnation. The 2004 start-up numbers have only reached 68 per cent of the 1998 level. Since then, the number of young advanced technology companies has decreased continuously.

A similar trend can be observed in the field of high-quality technology (e.g. mechanical engineering or the production of optical, photographic and medical equipment). For the first time in 13 years the sector's start-up number has increased and is two per cent higher than in 2003.

The rather slow development among start-ups in the field of advanced technology and high-quality technology can mainly be attributed to the lack of financing options for founders. In this context, restrictive bank lending is a major factor, but bureaucratic obstacles and the high administrative burden that accompanies business foundation also affect start-up activity. To eliminate these obstacles and to strengthen the start-up activity of these two branches, many people insist on a target-oriented economic policy. Political decision makers have already tackled the introduction of corresponding measures. Taking action is of major significance since both high-tech branches of the manufacturing industry constitute important pillars of the international competitiveness of German economy. This is owed to the fact that they are particularly R&D-intensive and thus contribute significantly to Germany’s technological performance.

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 (i.e. companies of the branchesadvanced technology and high-quality technology) 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).

For further information please contact

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

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