Innovations in Germany – Vehicle Construction at the Top

In 2004, vehicle construction industry spent 27.7 billion euros on innovation projects and thus outdoes every other sector in Germany. For 2005 and 2006, German vehicle construction also expects rising innovation budgets of 28.2 billion euros (2005) and 29.0 billion euros (2006).

Vehicle manufacturers also lead in terms of innovation success. Almost half of the revenues gained by the companies in this branch in 2004 were generated through new products. However, other sectors have also proven innovation-intensive. In 2004, the chemical industry recorded the highest share of leading research companies and the software and telecommunications branch displays the largest proportion of enterprises having successfully introduced innovations. These are the findings of the current 21 Sector Reports on Innovation by the Centre for European Economic Research (ZEW), Mannheim.

Innovation expenditure not only consists of expenses on research and development (R&D), but also comprises expenditures on new plants for the manufacturing of new products, market launch costs of new products as well as investments in rationalisation projects. In 2004, the innovation expenditure of vehicle construction made up 8.5 per cent of the sector's total turnover in Germany. This is more than in any other branch. The chemical industry (including pharmaceutical industry and mineral oil-refining) ranks second in innovation expenditure providing 11.8 billion euros for innovation projects (5.1 per cent of the sector's turnover). The branch also intends to slightly increase this amount in the following two years to 12.7 billion euros (2006). The electrical industry has recorded the third largest innovation expenditures. Displaying expenses of 11.2 billion euros, which represent 7.2 per cent of the sector’s turnover, this branch clearly outstripped the sectors of mechanical engineering, IT/telecommunications and banks/insurances.

Innovations are designed to improve the market launch of new products and a company's internal processes in order to reduce costs or raise the products’ quality. With regard to products, the vehicle manufacturing industry has again proved to be the most successful innovator. About 48 per cent of the revenues in 2004 were generated by products that had been introduced in the three years before. The innovation rate of the electrical industry lies at 44 per cent and in the areas of medicine, measuring and control technology, and mechanical engineering one out of three euros could be gained selling products not older than three years.

The electrical industry most successfully lowered its costs introducing process innovations. On average, the companies’ unit costs fell more than 9 per cent thanks to the increased efficiency of production processes in 2004. The medicine, measuring and control technology sector as well as vehicle construction and the chemical industry generated high contributions to rationalisation by means of process innovations.

Innovation expenses and innovation success of a branch are mainly determined by major companies. However it is also important that small and medium-sized enterprises (SME) participate in innovation activities. The IT and telecommunications branch display the highest innovation participation. In 2004, 78 per cent of all companies in this sector could be considered innovators, which means they successfully introduced new products or processes in the past three years. High innovation  participation was also recorded in mechanical engineering (75 per cent) as well as in the chemical and electrical industry (72 per cent each).

With regard to the companies’ R&D expenses only, the chemical industry ranks first. Between 2002 and 2004, 53 per cent of all chemical companies were continuously involved in R&D.

Sector Reports on Innovation

The Sector Reports on Innovation sum up important findings of the German Innovation Survey 2005 regarding 21 branches. Since 1993, the Centre for European Economic Research (ZEW) has conducted an annual survey about innovation activity in the German economy. The German Innovation Survey is conducted on behalf of the Federal Ministry of Education and Research. The survey 2005 comprises more than 9,400 firms of the sectors manufacturing, mining, energy and water supply, knowledge-intensive service providers (computer services, telecommunications, technical services, R&D services, consulting, advertising, banking, insurance, media) and other services (whole sale and retail trade, transport services, post services, cleaning, security, provision of personnel, other firm-related services, waste management).

Contact

Dr. Christian Rammer, Phone +49/621/1235-184, E-mail rammer@zew.de