Wirtschaftswunder points the way

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5 maart 2013 | Why is Germany’s innovation policy so successful and what can the rest of Europe learn from it? The Advisory Council for Science and Technology Policy analyzed Germany’s success and discovered crucial roles for PhD’s, family businesses and international talent in this ‘project of national interest’.

After the economic crisis of the seventies, Western-Europe transformed into a postindustrial economy. A great portion of Europe’s industry was outsourced to low-wage countries, mainly in East-Asia. While the rest of Europe’s focus shifted to finance and services, Germany specialized in the production of high-tech goods. The Wirtschaftswunder’s industry kept looking for niches in the global market for their high-quality specialized products. 

Project of national interest

Constant innovation in order to sustain its technological lead made the German high-tech sector flourish. For many years now, Germany invests systematically, consistently and sustainably in R&D. The German government takes a leading role in this by actively combining science, technology and industry. However it might not be called a surprise that German industry itself feels responsible for structural investments in R&D. According to the Advisory Council for Science and Technology Policy (AWT) R&D in Germany can be seen as a project of national interest.

What can the rest of Europe learn from Germany? Does Germany’s secret lie in its R&D-landscape? Due to federal structures it is highly complex, every state conducts its own R&D-policy. On top of that, universities and colleges are also managed on a state-level. The German minister for education has influence on education and research through research institutions, grant and scholarship programs and the Exzellenzinitiative.

One of the main strengths of Germany’s policy is his continuity and long-term vision. This way all actors, from education, government and industry are on the same page and can cooperate systematically. This means for example that the R&D-budget is not cut back under pressure of austerity policies. Germany’s long-term vision is called the HightechStrategie and in this strategy different actors and governmental bodies cooperate with an ‘out of the box mentality’ and a high ambition-level. The HightechStrategie stimulates German researchers to conduct interdisciplinary research in new technologies and breaks with the tradition of Industriepolitik.

PhD’s in family-businesses

The success of German R&D policy has the responsibility both government and industry take in achieving objectives at its fundament. German industry invests more than twice as much (as a percentage of the GDP) in R&D than the Dutch government. The majority of research in industry is conducted in the automotive, electro technical and chemical industries, but it is not only ‘big business’ that invests in research and development.

The large number of family businesses plays a major role in Germany’s success-story. These are often specialized companies that look for niches in the global market. These hidden champions do not focus on short-term profits, but on the long-term and therefore are all the more willing to invest in R&D.

Not only the type of company, family or big business, determines its success. Germany’s management-style, which is very different from the Anglo-Saxon, also nourishes innovation. Where in the UK and US companies are run by managers with MBA’s, Germany’s industry is to a greater extent led by technical PhD’s. This contributes to an environment in which R&D can flourish. Especially in the field of PhD programs, universities and the industry have a good relationship. Most engineers and almost all chemical students earn their PhD title, often on projects which have been proposed and financed by industry. In this German model, managers have more understanding of the company’s core competences.

Great international reputation

Nonetheless, Germany has a shortage of technically educated personnel, just like the rest of the world. The German government has an active, consistent and persistent policy aimed at getting a foothold in countries like China and Brazil. Germany promotes itself as ‘the’ high-tech country and not only succeeds in attracting master students from all over the world, but also foreign PhD students.

The fact that there are more than 33.000 foreign PhD students working in Germany, most of them in the fields of engineering and science, underwrites this success. The good reputation the German industry has in other countries is an important reason for foreign technical students to study in Germany. Within the German internationalization policy there is extensive cooperation between government and industry in order to find a good fit between German companies and local employees in, for example, China.

The DAAD, the German organization for international exchange of students and academics, is well known abroad. This did not happen overnight but is the result of a consistent policy stretching over decades. This also applies for the Alexander von Humboldt-Stiftung which is mainly active within the higher segment of senior researchers and professors.

Both the DAAD and the Alexander von Humboldt-Stiftung have extensive and excellent alumni programs through which they permanently keep in touch with the researchers whom they have financed. This policy is focused on creating a family feeling and the appropriate pride in belonging to a select company. Considering the number of people that call themselves Humboldtianer, Germany has been successful in this respect as well.

Germany’s key to success

So, what can be learned from Germany? The AWT summarizes that the Wirtschaftswunder has an “active, continuous and persistent R&D policy combined with a political appreciation for science and technology”. “The coordination of policies and high quality cooperation between ministries is essential, as is creating nationwide support for policy. Parties should not only agree on common objectives, but should also take responsibility for them. The switch from a line of policy focused on subsidies for large industries to policies focusing on investment in important issues of the future, has been proven to be successful. It has released a high level of energy in Germany and encouraged a broader outlook.”

Germany’s consistent world-class policy finally resulted in attracting the best students, researchers and technicians. These highly educated people are at the heart of Germany’s success.


The entire AWT report can be downloaded here

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