Regional Diversification Pays Off for Companies
ResearchUnilateral Dependencies Jeopardise Sovereignty and Supply Chains
Whether through subsidies for an Intel chip factory in Magdeburg or the National Security Strategy, German politics is aiming for greater digital sovereignty in response to current geopolitical risks and supply chain issues. Despite the advantages of regionally distributed procurement, however, companies face significant costs in diversifying their imports of information and communication technologies (ICT), such as microchips or other hardware components. A recent study conducted by ZEW Mannheim and DIW Berlin reveals that a stronger diversification of supply chains, irrespective of ongoing crises, is closely linked to business success.
“Access to ICT goods is vital for the digital sovereignty of the German economy, particularly in highly digitalised industries. This does not mean that these goods must be produced domestically. Instead, it is crucial to avoid unilateral dependencies by adopting a regionally diversified procurement strategy and thereby ensuring long-term access to ICT goods,” explains Professor Irene Bertschek, head of ZEW’s “Digital Economy” Unit and co-author of the study.
Microdata show correlation between diversification and business success
Using microdata from official statistics for the years 2010 and 2014, a total of 3,888 companies in Germany that import ICT goods were examined in the analysis. This allowed the researchers to capture the relationship between diversification and business success. “Based on our data, we can demonstrate a positive correlation between diversification and business success, even prior to the current geopolitical situation. This holds true for both smaller and larger companies,” says Dr. Thomas Niebel, senior researcher in ZEW’s “Digital Economy” Unit and co-author of the study. “By expanding the regional diversity of their sourcing countries, companies can become more resilient to crises. Diversification is therefore not a disadvantage but rather a driver of success for businesses,” explains Dr. Alexander Schiersch, research associate of the “Firms and Markets” Department at DIW Berlin.
