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East-West Gap in Private-Sector Research, Development, and Innovation in Germany is Structurally Related

Press Release of October 7, 2015

Very few research-intensive sectors and larger enterprises—research concentrated in public-sector and publicly funded research institutes and universities

Over the past two decades, research and development (R&D) activities in eastern Germany have increased substantially, albeit to a lesser extent than in western Germany. Furthermore, R&D in eastern Germany was primarily conducted by public-sector research institutes and less so by universities and businesses. In 2013, overall, R&D activities in eastern Germany reached 86 percent of the western German level; in the private sector, eastern Germany reached just under 50 percent of the western German level. These are the key findings of a recent study conducted by the German Institute for Economic Research (DIW Berlin). This gap is due to the economic and corporate structure: research-intensive sectors and larger enterprises that conduct more research and development overall than smaller enterprises are less frequently located in eastern Germany. According to DIW expert, Alexander Eickelpasch, “Given the structural differences, an approximation to the western German level is not anticipated in the foreseeable future.” However, too much importance should not be attached to this because, “There is also a great deal of regional dispersion in the R&D activities of the private sector in western Germany.”

Twice as much public-sector and publicly funded research in eastern Germany

After an initially rapid downturn after the fall of the Berlin Wall, R&D expanded considerably in eastern Germany. As a result, employment in the R&D sector has increased markedly since 2005, reaching one-fifth of the 1995 level by 2013. R&D spending also expanded to 10.4 billion euros in 2013, almost twice the 1995 level. Public-sector and publicly funded research institutes were the drivers of development, both in terms of personnel and expenditure. Although the research intensity of these institutes is twice as high in eastern Germany and that of universities is one-third greater than in western Germany, the east-west gap in research and development is still clearly evident, however.

Fewer patent applications and new products

Based on patent applications, it is apparent that research output in eastern Germany is still lagging far behind western Germany and the gap has shown no real sign of narrowing in recent years. The same applies to new products as a share of companies’ overall turnover: in eastern Germany, it is 12 percent in the manufacturing sector (20 percent in western Germany) and 2.0 percent in industrial products (3.9 percent in western Germany).

Neither eastern nor western Germany is homogeneous in economic terms

Given the potential of public research in eastern Germany, Alexander Eickelpasch advocates stepping up networking in the promotion of private-sector innovation to encourage small and medium-sized enterprises to utilize the extensive public research infrastructure. Due to the structural difference, however, an imminent narrowing of the gap is not expected any time soon. Since there is also considerable regional dispersion within western Germany in terms of economic structure and R&D, a unified approach to promoting research and development in Germany should be sought once funding programs specifically aimed at eastern Germany have expired in 2020.