Germany’s competitiveness as a location for innovation: an international comparison

This study examines Germany’s position in the global market for technology goods and knowledge-intensive services. It predicts that, by 2023, Germany will rank in the middle of the international field, with research-intensive industries and knowledge-intensive services accounting for 41.6% of gross value added.

Of particular note is the strong specialisation in research-intensive industries, which contribute 13.9% to value added and are thus internationally leading, primarily due to the strength of the automotive and mechanical engineering sectors. However, the region has experienced a period of weakness since 2017, raising questions about its future competitiveness.

In contrast, the share of knowledge-intensive services has stagnated at 27.7% for two decades, a worrying trend given the ongoing global digitalisation and tertiary sector growth. Countries such as Japan, Switzerland and Israel have significantly higher shares of value added, indicating stronger momentum in these sectors.

Productivity trends between 2010 and 2023 paint a mixed picture: while labour productivity in cutting-edge technologies increased by 43%, remaining internationally competitive, this growth was significantly lower than in the first decade of the millennium. Producers of high-quality technology goods recorded an increase of only 18%, which is moderate by global standards.

Knowledge-intensive services increased their productivity by 8% — a peak value within the Eurozone — but this growth merely offset the losses of the previous decade. Germany lags significantly behind in international comparisons, especially with the USA, which has recorded an increase of 105% since 2000.

International trade in research-intensive goods declined by 4.3% in 2023, with trade in cutting-edge technology falling by 11.6%, while trade in high-value technologies rose slightly by 0.1%. Geopolitical tensions, such as the war in Ukraine, and the resulting supply chain issues have had a significant impact on trade flows.

While Germany continues to demonstrate positive specialisation in research-intensive goods, the extent of this specialisation is declining, reaching only +9 in 2023. In the cutting-edge technology segment, the balance is negative at -21, with only comparative advantages in the aerospace and MMSRO products sectors.

In summary, although Germany remains a key player in research-intensive industries, it is facing growing challenges. Weak momentum in knowledge-intensive services and declining competitiveness in cutting-edge technology require structural adjustments if the country is to remain internationally competitive in the long term.

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