23/10/2017

R&D Framework

German firms are global leaders in the development of new technologies.

For over a century, the “Made in Germany” label has stood for innovation and excellent quality.
Exports of high-tech products in 2009 were worth a total of 102 billion euros. This makes Germany the top exporter in Europe and the second largest in the world.

Innovative Power

Germany enjoys an excellent reputation regarding its dynamic and innovative R&D environment. This is regularly confirmed by leading international comparisons on innovative capability. The latest example can be found in the current Innovation Union Scoreboard (IUS), which is used as an instrument by the European Commission for the evaluation of the innovative performance of European nations. The IUS ranks Germany among the group of leading innovators. Within the EU, only Sweden and Denmark are placed ahead of the German R&D location. With its high innovation output, Germany is a first rate location for R&D projects.

The 'Innovation Index' is made up from a total of 25 indicators for the measurement of innovation. Along with others, public and private R&D outlay, the education level, and the proportion of patent grants at the international patent offices per million inhabitants are considered. The Innovation Union Scoreboard (IUS) was developed in the scope of the Lisbon strategy and is an instrument of the European Commission.
Source: European Innovation Scoreboard (2013)


The unique innovative potential of Germany as a research location is also acknowledged by international executives. According to a survey by Ernst & Young, a quarter of the decision-makers asked, think Germany is the most attractive R&D location in the world, ahead of neighbouring Switzerland as well as the USA.
A further expression of the 'world class performance' of German R&D departments is provided by the results of the surveys by the American Chamber of Commerce in Germany (AmCham).
In these surveys 29 percent of the companies state that they are developing their R&D activities in Germany. For this reason, they are increasingly establishing their own research and development centres that are utilising R&D potentials with national as well as global responsibilities.

Basic year 2009 (data in %). Survey is based on 700 opinions provided by international decision makers.
Source: Ernst & Young (2009)

High Proportion of Innovation

More than 27 percent of the turnover in the German manufacturing industry originates from the sale of innovative products. Those  products are defined as being  recently added to a company's product range and introduced to the market. In comparison, in France and the United Kingdom the turnover shares of innovative products in total manufacturing add up to 16 percent, and in Finland 21 percent, respectively. The European average is currently at 19 percent.
In 2010 a study was published by the German Institute for Economic Research with the result that nowhere else in Europe do research-intensive sectors within manufacturing industry achieve levels of turnover that are as high as those attained in Germany. Companies can secure market leadership in the corresponding niche by quickly bringing their latest innovations to market maturity.

R&D LANDSCAPE

Rising R&D Expenditure
In Germany, enormous sums of money are invested in the development of new technologies and innovations. No other country in Europe invests greater sums in research and development (R&D). Since 2000, Germany R&D expenditures have been continuously rising.
In 2012, public and private spending on research projects in Germany amounted to approximately EUR 79.4 billion – representing 2.98% of GDP. This share places fourth in Europe, behind the Scandinavian countries (Finland, Sweden, Denmark), but significantly ahead of France and the United Kingdom.

This means that Germany is well on track to achieving the 3 percent goal specified by the European Union within the coming years. More than two thirds of the expenditure are accounted for by research intensive private business.

Einstein's Heirs
The strong research location of Germany has always contributed to the emergence of important world-class scientists. Albert Einstein's career started in Germany and culminated in the award of the Nobel Prize in Physics in 1921. However, the continuity of Germany's research quality is not only underlined by Max Planck and Robert Koch, but also by the two last Nobel Prize Winners, Harald zur Hausen (2008) and Peter Grünberg (2007): more than 70 scientific Nobel Prizes were awarded to Germans.
Germany is home of the biggest research community in Europe – 21 percent of the scientists in the EU live and work here. Moreover, German researchers cooperate in projects all over the world. For example, the Max-Planck-Gesellschaft currently participates in 4,500 international research projects with about 5,400 partners in more than 120 countries.

Proven Transfer of Knowledge
Germany's R&D landscape is characterized by a close cooperation between science and economy. It is based on the dense and decentralized network of more than 400 universities and technical colleges. But the availability of highly qualified university graduates all over Germany is not the only thing it ensures.
Also the private industry uses these valuable opportunities for cooperation and the access channels to fundamental and applied research at the universities. The findings of the work performed there are effectively used for industrial implementation. Scientists can easily be integrated into the corporate teams of developers and researchers. In addition, laboratory equipment is increasingly made available by the institutes.
Germany even made significant progress in formal technology transfer over the last years. This includes mainly 24 patent exploitation offices established in 2001 enabling a commercialization of results subject to property rights created in the universities and their transfer to the industry. And, research institutes outside the university have their own exploitation bodies.

Renowned Research Institutes
In a worldwide comparison, Germany holds a unique position thanks to its publicly subsidized research communities outside the universities.
The application-oriented research communities, Fraunhofer-Gesellschaft and Leibniz-Gemeinschaft, provide mainly small and medium-sized companies with access to top research. Fraunhofer-Gesellschaft invests EUR 1.6 billion of research money in its more than 80 facilities and over 17,000 employees. A major part of the funds is generated by contractual research in collaboration with the industry.
Leibniz-Gemeinschaft's network comprises 83 institutes and almost 14,000 employees. And the most renowned institutes for fundamental research in the world are located in Germany as well. Max-Planck-Gesellschaft and Helmholtz-Gemeinschaft enable companies to outsource costly fundamental research, thus reducing the risk associated with the development of new products and decreasing R&D expenditure.

The interaction of universities, research organizations, industrial research and other actors constitutes a division of labor in the creation of value-added new knowledge which is unique in the world. This differentiated performance of tasks by the institutes involved covers the entire range from pre-competitive fundamental research mostly supported by the public sector up to tradeable application research financed by the industry.

Effective Networks of Competency
Germany is characterized by an advanced structure of highly innovative regional networks and clusters providing companies with excellent access to knowledge, technologies and value chains. Interactive research and learning processes ensure a faster diffusion of technology, including a subsequent introduction in the market.
A special quality seal is the membership in the “go-cluster“ initiative of the Federal Ministry of Economic Affairs and Energy. This initiative includes already more than 60 clusters that meet stringent criteria for membership. Admission depends on the level of cooperation between industry and science. This includes the extent to which a potential member is actively dedicated to innovation. Additionally, the “go-cluster”-membership facilitates access to funds for the development of special cluster services.
Cooperative community research is also taking place in the research networks of the industry-funded “Arbeitsgemeinschaft industrieller Forschungsvereinigungen (AiF – Work Group of Industrial Research Associations).“ More than 50,000 small and medium-sized companies have organized approx. 103 consortiums and perform research projects relevant for specific spheres of technology. It facilitates the for partners and the access to university networks and helps to overcome structure-based disadvantages of SMEs in the field of R&D.

Trend-Setting Reform Initiatives
The Federal Government and the Federal States of Germany set the course for facing the challenges of an intensive, global innovation competition on the path to a knowledge-based economy. Three large reform instruments ensure that the German scientific system is equipped for the future. Objective of the excellence initiative is to expand innovative top research at the universities. It subsidizes 37 research facilities in 13 Federal States to increase their international visibility and competitiveness. Comprehensive financial funds are also provided under the Hochschulpakt 2020 (Higher Education Pact) reform initiative to satisfy the need for highly skilled professionals. In the years 2011 to 2015, this program will help to create an offer meeting the demands of an expected number of 275,000 additional university freshmen.
These reform efforts are completed by the Pakt für Forschung und Innovation (Joint Initiative for Research and Innovation). This program is dedicated to non-universitary research institutes to secure their budgets on international research projects. The Federal Government and the Federal States will increase the annual grants by 5 percent in the years from 2011 to 2015 in order to meet this objective.
Another objective of the Federal Government, in addition to the reform of the scientific system, is the development and exploitation of international R&D potentials. The internationalization strategy created in 2008 initiated a high number of measures, including the establishment of Deutsche Wissenschafts- und Innovationshäuser (German Houses of Science and Innovation) in the most important metropolises worldwide. These are centralized points of contact and service for researchers and companies where they can receive information on Germany as a location for science.

Industry Potential

Investments in Research and Development
Germany's position as a high-tech country is no mere accident. Companies invest significant sums in order to continually bring innovative products and services to the market. According to the joint initiative of German industry for promoting science and humanities (Stifterverband), economy-related research and development expenditure accounted for EUR 57.4 billion in 2009. In the following, we present a selection of the relevant fields of research in Germany for investors with ambitious R&D goals.

Information and Communication Technology (ICT)



The success of Germany’s ICT industry is strongly rooted in the country’s R&D infrastructure. The Fraunhofer Heinrich-Hertz-Institute (HHI), recognized with two Emmy awards for its contribution to video compression, stands as an example of the unique research landscape that emerges when cutting-edge companies partner with renowned research institutes. Enabled by both public and private funding, R&D in recent years has made great strides in advancing innovation.

The most recent developments range from facial recognition technology to high-speed data networks. One highlight is the H.264 standard for video compression, which is an essential component of data management on iTunes, YouTube and Blu-ray.

Alongside the largest market for both consumers and companies, Germany presents excellent opportunities for foreign companies looking to bring their innovations to market.

Fine and Specialty Chemicals

For innovative companies seeking to adapt their innovations to the specific demands of the European market or to develop the next generation products, Germany is a prime location.
Here they can tap into a well-established network of industry and academia and have direct access to first-class facilities, specific scientific and industrial projects and greater contact with suppliers and customers. Furthermore many Chemicals sites offer the benefit of co-locating global players and are often members of innovation clusters, which are increasingly established by government to stimulate German expertise.
Internationally, Germany is considered to be a testing ground for energy efficiency and new energy concepts. Investors interested in R&D projects within industrial biotechnology, lightweight materials, and process technologies for energy storage would be well advised to come and see for themselves what Germany has to offer.
Photovoltaics

In the photovoltaic (PV) industry, three fields of research are especially interesting for investors: High-efficiency silicon cell and module development, thin-film solar technology (for example, CIGS) and the nascent organic PV segment. The optimization of system technology and net integration are currently undergoing intense R&D. This ranges from new inverter technology to cutting-edge energy storage options.

To make this possible, Germany offers the R&D landscape with the highest density of institutes and companies conducting research worldwide. This is reflected in Germany’s expertise, alongside the USA and Japan, in driving innovation in PV. Not only do companies benefit from knowledge-sharing, they also have the ability to develop and implement new products in the largest PV market worldwide. Innovative businesses also profit from cooperation with related industries, such as chemicals, microelectronics, semiconductors as well as machinery and equipment.

The German government strongly supports research in the PV industry. EUR 1.15 billion are available in 2009 and 2010 for the development of technology for the use of renewable energies. Additionally, an agreement in place since 2007 between the Federal Ministry of Education and Research and the companies BASF and BOSCH commits EUR 360 million to the development of organic PV.

R&D Incentives

Research and development (R&D) are the cornerstones of the future of the German economy. Generous public funding programs contribute to the excellent conditions allowing companies from all over the world to carry out their R&D in Germany: setting the stage for international high-tech products "made in Germany."
The public and private sectors have made a significant commitment to spend around three percent of national GDP per year on R&D activity. This amounts to approximately EUR 70 billion R&D spending annually.

Germany's High-Tech Strategy

The German federal government promotes research through the so-called High-Tech Strategy. This initiative defines areas of particular significance due to their contribution to solving global challenges. Support is also granted to key technologies that act as innovation drivers.

Concrete calls for project proposal submissions specify the type of support (in the form of subsidies) that will be offered. In this way, several billion euros can annually flow into projects that focus on research and development for innovative products, processes, and services – all carried out within Germany.
R&D Subsidies for All Types of Technology

There are also subsidy programs in place for all types of technology that are primarily targeted at small and medium-sized enterprises (SMEs). The “Central Innovation Program for SMEs” (ZIM) is the best known of these programs; its aim is to promote innovation and competitiveness at SMEs.

Additional R&D Subsidies
The German federal government is not the only institution that offers support in the form of subsidies for R&D projects. The German state governments also provide innovative R&D programs through their business development banks; these programs generally tend to be open to all types of technology.

One attractive alternative to R&D subsidies is special credit programs that promote innovative projects. The KfW, Germany’s federal government-owned development bank, and the German state development banks have a wide range of programs available for this purpose. The advantage of these programs is that they are open to all types of technology and generally cover higher R&D costs.

Young technology companies, in particular, tend to have to rely on their own capital. The public sector here in Germany has the ideal programs in place for these companies as well; venture capital firms on the federal or state level that are fully government-owned or are co-owned by the government offer equity capital for the early stages of company development. A prime example of these programs is High-Tech Gründerfonds, an initiative of the German Federal Ministry of Economic Affairs and Energy (BMWi) that provides innovative start-ups with funding. High-Tech Gründerfonds is supported by renowned partners from German industry.

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