German Innovation Spending Higher than Ever
Research
27.01.2026
The 2025 Innovation Survey: Innovation Activities of the German Economy
Innovation spending by the German economy rose to 213.3 billion euros in 2024. This corresponds to an increase of 4.9 per cent compared to the previous year, and is a slight real increase considering the inflation rate of 3.1 per cent. Innovation planning for the coming years remains at a constant level, according to the new 2025 Innovation Survey conducted by ZEW Mannheim on behalf of the Federal Ministry of Research, Technology and Space (BMFTR).
Dorothee Bär, Federal Minister for Research, Technology and Space, says: “The federal government aims to make our country a leader in new technologies. Our ‘High-Tech Agenda Germany’ will promote international competitiveness, value creation and technological sovereignty. This calls for companies to invest in innovation, and the government will support them to enable this. The increasing use of AI makes me optimistic – it is a decisive competitive factor. We are specifically promoting AI as a key technology, making it an important tool in central fields of research and application.”
“The survey results show that companies in Germany continue to invest specifically in innovation to safeguard their competitiveness, even under difficult economic conditions. What is particularly striking is the noticeable increase in innovation expenditure in the service sector, which highlights the structural shift towards new, innovative service offerings,” explains Dr. Christian Rammer, deputy head of the ZEW's “Economics of Innovation and Industrial Dynamics” Research Unit. “Despite considerable uncertainty in innovation planning, many firms continue to rely on innovation to strengthen their market position. For policymakers, the task is to create an innovation-friendly investment environment companies can rely on. This starts with reducing bureaucracy and extends to the supply of skilled workers, attractive financing conditions and fair competition.”
Marked increase in service sector innovation spending
As in previous years, the shift in innovation activity towards services continues. The service sector in particular is contributing above average to this development with an increase in activity of 8.3 per cent, while growth in industry is significantly lower at 3.5 per cent. However, at 150.1 billion euros, the level of innovation expenditure in industry is more than twice as high as in services (63.1 billion euros).
The largest share of innovation expenditure is accounted for by large companies with 250 or more employees. In 2024, they spent 178.4 billion euros on innovation, which is equivalent to a 4.4 per cent increase over the previous year. Small and medium-sized enterprises (SMEs) reported innovation expenditure of 34.9 billion euros in 2024, thus outstripping large companies by an increase of 7.1 per cent.
Use of artificial intelligence
Firms in Germany are increasingly using artificial intelligence (AI). A good quarter of companies actively implement AI solutions in their business processes or products. The adoption of AI started to become widespread in 2023. At the time, around 14 per cent were already employing AI technology. By the end of 2024, the share had increased to almost 24 per cent. The spread of AI is more advanced in the service sector (28 per cent) than in industry (19 per cent). More than half of large companies used AI methods in 2025, while the figure for SMEs was just under 25 per cent.
The industry in which AI is most prevalent is ‘Information and communication’, which includes software and IT services. Fifty-eight percent of companies in this industry use AI technology in products or business processes. AI adoption is also high in the consulting industry (legal, business, management consulting, advertising), at 53 per cent, and in financial services (banks, insurance companies, financial intermediaries), at 37 per cent. The electrical industry leads the way among the industrial sectors, with a 35 per cent share of AI usage in products or business processes.
About the ZEW Innovation Survey
ZEW Mannheim, in cooperation with the Institute for Applied Social Sciences (infas) and the Fraunhofer Institute for Systems and Innovation Research (ISI), collects data on the innovation activities of German companies every year on behalf of the Federal Ministry of Research, Technology and Space (BMFTR). The study considers companies with five or more employees. In 2024, these were around 369,000 companies.
