IAB/ZEW Start-up Panel Shows Decline in Innovative Sectors
The number of business start-ups in Germany rose slightly in 2024. With around 157,000 new firms, their number increased by three per cent compared to the year before. This marks the first sign of a turnaround since 2021, albeit at a still low level. At the same time, data from the latest IAB/ZEW Start-up Panel show that industrial and innovative sectors in particular continue to lose momentum: While the service sector is growing, the number of start-ups and innovation activity in research-intensive industries are both declining significantly.
“The slight recovery in start-up figures should not obscure the fact that structural problems persist. In the manufacturing and innovative sectors especially, we have observed a downward trend for years, which even intensified in 2024,” explains Dr. Sandra Gottschalk, researcher in ZEW’s “Economics of Innovation and Industrial Dynamics” Research Unit. “The sharp decline in product innovation is particularly worrying. Young companies are much less likely to bring new products to the market and in the long term this weakens competitiveness.”
Service sector drives start-up activity
The growth in new business start-ups is primarily driven by the service sector. Here, the number of start-ups rose significantly, particularly in consumer-oriented sectors such as catering, retail and personal services. By contrast, the negative trend in manufacturing continues: The number of start-ups fell by eleven per cent in 2024. The causes include high energy costs, international competition and geopolitical uncertainties.
Innovation capacity and employment under pressure
In parallel with the decline in start-up numbers, the innovative output of young companies is falling significantly. Only four per cent of young firms now introduce new products to the market – roughly half as many as in the previous year. Research-intensive sectors are particularly affected, with the proportion of innovative companies declining sharply. Although the overall proportion of companies engaged in research and development remains stable, declines are also evident in key industrial sectors. This development suggests that young companies are increasingly struggling to successfully establish new products and technologies on the market.
About the IAB/ZEW Start-up Panel
The IAB/ZEW Start-up Panel is a representative data sample providing information on business start-ups and new companies in Germany. The data serve as a suitable basis for describing and analysing the structure and development of start-ups. In terms of both sample size and the granularity provided, the IAB/ZEW Start-up Panel is a unique data source. It is used by a great number of publications and projects as a source of background information on the business situation and dynamics as well as on the development of funding instruments for start-ups in Germany.
