The aim of the study is to examine the innovation performance and the development of productivity in the German economy, with particular attention to the situation in medium-sized firms and the contribution of these firms to innovation and productivity. The study builds on the results of an EFI report from 2016 that investigated the contribution of SMEs to research and innovation in Germany. This report was prepared by ZEW and used the same data base (Mannheim Innovation Panel for innovation indicators, Mannheim Enterprise Panel for identifying firms belonging to the 'Mittelstand'). This ensures direct connectivity between the results of the study and the EFI report from 2016. The study focuses on three questions:

• How have the innovation activities of the German economy as a whole and of medium-sized companies developed, both on the input side (innovation expenditure, innovation activities) and on the output side (introduction of different types of innovations, direct economic returns from innovations)?
• What factors determine the innovative activity of (medium-sized) companies both positively (driving forces) and negatively (obstacles), and what role does public funding of innovation activities play in this?
• What contribution do innovations make to the productivity of (medium-sized) companies, and how has this contribution developed over time?

Based on the insights gained from the empirical analysis, recommendations for innovation policy are derived.