Small and medium-sized enterprises (SMEs) are the backbone of the German economy: almost 60% of employees in Germany who are subject to social insurance work here. However a study by the Federal Ministry of Economics shows that this most important part of the German economy is in danger. The Center for European Economic Research (ZEW) analyzed the status of innovation activity in SMEs. The so-called "innovator quota" describes the share of SMEs who have introduced product or process innovations within a three-year period. In 1999, this amounted to 56 per cent of SMEs, while in 2014 only 37 per cent.
Ulrich Grillo, President of BDI (The Voice of German Industry), warns that there are too few industrial startups, especially in the manufacturing sector. Since these are important to the innovation capability of the entire industry, Germany in trouble of being losing its international innovation competitiveness. A high administrative burden in setting up a company could be a reason for this. In addition, a survey of more than 100 experts from industry, science and politics revealed that SMEs often neglect strategic innovation activities in favor of short-term projects. Statistics show that German SMEs spend less on innovation than foreign competitors, and while the innovation spending of large corporations is rising, those of the SMEs are declining.
The Federal Ministry of Economics and Technology wants to start with a targeted state subsidy. A ten per cent allowance on the personnel costs in research and development is planned in the near future.