Innovation Atlas: Highly Innovative Companies Thrive in Southern Germany

Frankfurt am Main. Where are the most innovative companies in the whole country? The Wolfsburg/Braunschweig region is at the forefront, where the Volkswagen Group is at home. Investments in research and development (R&D) are outstanding not only at national level, but also in an EU comparison. This emerges from the current innovation atlas of the German Economic Institute (IW), which is available to the editorial network Germany (RND).

The regions of Stuttgart, Munich and Ingolstadt, where major car manufacturers also have their headquarters, perform similarly well. According to EU figures, the industry accounts for almost a third of all R&D expenditure in Europe. These then translate into a far above-average number of patent applications. Here, however, the area around the Baden-Württemberg state capital has the edge. Which has to do with the fact that important IT companies also have large locations there – such as IBM with its research center in Böblingen.

In addition to R&D and patents, the author and the three IW authors have also analyzed where highly qualified people with technical and scientific expertise work (mint professions), where many high-tech companies are founded and where companies that are fit for what is known as Industry 4.0 work.

Highly innovative companies in the south

All in all, there is a severe imbalance in this country. There is a strong south-north, west-east and urban-rural divide which, according to the IW analyses, is becoming increasingly problematic for structurally weak areas. “At the level of economic areas, highly innovative regions dominate in Baden-Württemberg and Bavaria,” says the study.

The area in the north shaped by Volkswagen is one of the outliers – also with regard to the high proportion of employees in mining professions, which is not so pronounced anywhere else in the country. The phalanx of Bavaria and BaWü is also broken by the Rhine-Main area in the “Industry 4.0 Readiness” category. The offer of the Technical University of Darmstadt is particularly noteworthy, “which offers a test environment for the development of new products and software in its Center for Industrial Productivity,” according to the study. There, companies and their employees can try out how it works when development, production, logistics and sales are linked with advanced algorithms to increase efficiency.

In general, innovation happens in metropolitan areas where large industrial companies are developing new things and universities are not far away. The area around Remscheid with Solingen, Wuppertal and the Oberberg district steps out of line in the R&D category. “This is all the more impressive when you consider that the economic structure there is not shaped by a few dominant large corporations, but by many medium-sized companies with strong research and innovation strengths,” says the IW.

Another positive ray of hope: Jena is expressly mentioned as one of the few lighthouses in East Germany. A cluster for opto-electronics has developed there with companies such as Jenoptik and Zeiss, many of which are world leaders with their products. The city and its surroundings in Thuringia could serve as a role model for the eastern German economic areas and as an example of how efforts in the field of innovation – including high-tech start-ups – lead to sustainable success.

sadness in the east

In large parts of East Germany, however, there is sadness. In the overall ranking, the regions of Prignitz, Uckermark and Dessau are far behind. Even Leipzig and the district of the same name only made it to 70th place out of 85 regions. Magdeburg ranks right in front of it – that should change massively when the Intel chip factory there is opened in a few years. Thanks to its TU and its already existing semiconductor industry, Dresden still made it to 37th place.

The overall assessment of the authors is sobering. In terms of R&D, two thirds of all regions failed to meet the federal government’s target of investing 2 percent of economic output in R&D. The gap in terms of innovative strength is getting wider and wider. The result: “Rural regions in particular could lose touch permanently.” Little research and problems in recruiting highly qualified people went hand in hand with a backlog of company foundations, patent applications and the implementation of Industry 4.0.

The IW researchers’ recommendations for action include: expanding government funding for research and development in companies; Universities should make even more efforts to attract foreign students for the STEM subjects and more intensively to the topic of entrepreneurship; the immigration of experts must be promoted; it is important to intensify the broadband expansion and to increase the staff of the Patent and Trademark Office.