Pressemitteilung/Press Release

Press Release of 26 August 2015

Investment in research and development fueling economic growths

Juha Tuomi (Copyright)  Wissenschaft Forschung Wissenschaften
Copyright: Juha Tuomi

Germany's R&D intensity above average in international comparison – automotive industry, in particular the motor vehicle industry, accounts for 85 percent of research expenditure – public research growing in importance

A country’s investment in research and development (R&D) is a key driver of its economic growth. This is the conclusion of a study conducted by the German Institute for Economic Research (DIW Berlin) on behalf of KfW Bankengruppe. The study, for which the researchers employed various econometric methods such as panel models and time series models, analyzes the relationship between R&D and economic growth in Germany and other research-intensive OECD countries over the past few decades. “An increase in research spending is already starting to lead to a significant increase in gross domestic product in the following year,” explains Heike Belitz, who led the study.

Germany nearing the three-percent R&D investment target

With the Lisbon Strategy in the year 2000, the European Union declared its intention to become “the most competitive, dynamic knowledge-driven economy in the world.” To achieve this goal, R&D expenditure needed to increase to three percent of the GDP. By 2012, Germany had nearly reached this goal. At the same time, the R&D intensity of the Federal Republic was not only above average for OECD countries, but also above that of the U.S. and far above those of both France and Great Britain. As well, Germany’s lag behind Finland, Sweden, and Japan began to lessen. "In an international comparison, the pace that Germany has achieved is relatively high," says Belitz. "In recent years, there was only one country where research investment grew faster than it did in Germany, and that was South Korea." However, the average annual growth rate of R&D in Germany over the longer period between 1995 and 2012, at 3.2 percent, was still below the OECD average of 3.4 percent.

Germany's R&D concentrated in only a few industries

Eighty-five percent of private research investment in Germany goes into the manufacturing sector. By comparison, this share stands at only 70 percent in the U.S., at just under 50 percent in France, and at 37 percent in the UK. In Germany, R&D expenditures are concentrated in only three sectors: automotive, computer and electrical engineering, and mechanical engineering. However, in the especially research-intensive countries of Finland, South Korea, and Japan, the industry concentration is even greater. Nearly one-third of investments in Germany are made in motor vehicle construction alone. At the same time, this industry is particularly research-intensive: Its R&D investments stand at 26 percent in relation to the value added, and are thus just as high as in other advanced technology sectors.

The increasing importance of public research

Both the private sector as well as the government has contributed to the R&D intensity increase in Germany that has been taking place since 2007. R&D investment in the public sector, which includes universities and government research institutions, grew more strongly than did the GDP for the first time since the mid-1990s. According to Belitz and the other researchers involved in the study, “This momentum has contributed to the fact that Germany is in such good standing today.”

In order for Germany to continue to withstand international competition, however, DIW Berlin’s economists recommend that the public and private sectors not let up in their efforts. “For a country that owes its prosperity to a significant share of the R&D-intensive industry and production-related, knowledge-intensive services, research and development remain key prerequisites for future growth.”

Links

Economic Bulletin 35/2015 | PDF, 410.23 KB

Interview with Heike Belitz | PDF, 96.88 KB

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German Institute for Economic Research

Founded in 1925, DIW Berlin (the German Institute for Economic Research) is one of the leading economic research institutes in Germany. The Institute analyzes the economic and social aspects of topical issues, formulating and disseminating policy advice based on its research findings. DIW Berlin is part of both the national and international scientific communities, provides research infrastructure to academics all over the world, and promotes the next generation of scientists. A member of the Leibniz Association, DIW Berlin is independent and primarily publicly funded.

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