Upward Trend in High-Tech Start-Ups

In 2007, there were more high-tech start-ups in Germany than in the previous years. Despite this upward tendency, the number of start-ups is still below the number reached in 1995. These are the findings of a study conducted by the Centre for European Economic Research (ZEW) in Mannheim in cooperation with Microsoft Germany. The study outlines that the number of high-tech start-ups in 2007 increased by four percent compared to the previous year to a total of 19,200 start-ups. The extraordinary good economic situation in the high-tech sectors is the reason for this trend. High-tech start-ups develop contrary to the general trend as the number of start-ups in all economic sectors is still declining. There are clear regional differences concerning the number of high-tech start-ups over the last ten years: Nuremberg surprisingly ranked second after Munich, the Stuttgart region on the other hand lost its place among the top ranks. The study also finds that every twelfth high tech firm in Germany is founded by a majority of women.

Particularly in the industrial high-tech sector, there were six percent more start-ups in 2007 than in the previous year, namely 2,600. "The reason for this trend is the good economic situation in the industrial sector, especially in mechanical engineering and electrical engineering", says Dr. Georg Licht, head of the department Industrial Economics and International Management of the ZEW. "Despite the positive development in the high-tech sector, it is too early for an all-clear sign. The number of start-ups is still below the number of 1995. To have a lasting effect on the overall economy, Germany does not only need a higher number of start-ups in the high-tech sector, but also an increase of fast-growing start-ups of high quality. These have to come out on top with innovative products and technologies on the German and the global market."

High-tech start-ups are not created out of unemployment

The study also shows that high-tech start-ups are hardly ever created out of unemployment. Generally, the number of start-ups is influenced by the unemployment rate in all economic sectors. This is hardly ever the case for the number of start-ups in the high-tech sector.

"High-tech start-ups are mostly the result of a decision made by an entrepreneur after long consideration", explains Achim Berg, General Manager of Microsoft Germany. "Therefore, the special demands in the high-tech sector have to be considered in order to get state subsidies flourish. Individual subsidies are more effective than standardised subsidies. However, too little approaches are made. Due to the economic upturn, the necessity of financial fostering innovations has become less important in German politics. Germany as business location only remains competitive by creating innovations and the high-tech sector plays a key role thereby. Topics like innovation politics and financing high-tech start-ups have to come to the fore in German politics."

To speed up the growth of ambitious start-ups, Microsoft supports selected young firms in the high-tech sector with its know-how and contacts within the start-up initiative called "unternimm.was" ("do something").The initiative’s main aim is to promote the start-ups’ development.

Comparison between regions: Nuremberg surprising winner

In Munich the highest number of start-ups is seen and there the start-ups are highly developed. Thus, Munich is the uncontested number one when comparing the regional development of high-tech start-ups. In the last years, the Nuremberg region is upcoming particularly concerning high tech start-ups in the industrial sector. It is ranked second after Munich. "Two things are crucial for the fact that the number of start-ups in the Nuremberg region is above average: firstly, the politics in the metropolitan region Nuremberg is committed to set positive general conditions. Secondly, the Nuremberg region is famous for the close cooperation of all institutions relevant for start-ups", Arne-G. Hostrup, manager of netzwerk|nordbayern explains. Moreover, the distinct research and university landscape and the proximity of established firms positively influence the number of start-ups in the metropolitan region Nuremberg.

Further results of the regional comparison: winners in the high-tech sector are the regions of Hamburg and Hannover which climbed three and five ranks, respectively. Stuttgart region on the other hand is one of the losers in high-tech services and the industrial high-tech sector. The region has gradually lost its advantage over the last ten years and has almost fallen back to national average.

The intensity of start-ups was studied in the eleven German metropolitan regions. These have organised themselves in an initiative of European metropolitan regions (Initiativkreis Europäische Metropolregionen). The ratio of start-ups to employees in one region is what is called the start-up intensity. This is used to compare the start-up potential of cities to regions with less population.

Small percentage of women in high-tech start-ups

Every twelfth high-tech start-up in Germany is headed by a majority of women (women start-ups have a percentage of women of more than 50 percent). Therefore, the percentage of women start-ups in the high-tech sector (about eight percent) is clearly below the percentage of the overall economy (16 percent).

Firms founded by women are characterised by a moderate growth in turnover and employment as well as a stable firm development in the first years. The start-up team often has good commercial knowledge which influences the sectors in which women start firms. Women start-ups are usually in the service sector of the high-tech sector. Only few are in the industrial sector, in particular high technology. "Many things indicate that women choose less risky start-ups which make less profit and grow less", Licht says.

When financing the firm, there are only few significant differences between start-ups managed by women compared to those managed by men. "This indicates, in contrary to the common opinion, that women founding a firm have no more difficulties in finding external funds than their male colleagues", Licht says.

Contact

Dr. Georg Licht, Phone +49 621-1235-177, E-mail licht@zew.de