According to a new German Institute for Economic Research (DIW) study, Germany is in the top five industrialised countries. However, investment is concentrated in only a small part of the industrial sector. 

One of the EU's goals, outlined in 2000's Lisbon Strategy, was to increase expenditure on R&D to 3% of GDP within 10 years. According to a DIW study published on Wednesday (26 August), Germany achieved this goal in 2012.

"The R&D intensity of the Federal Republic was not only above average for OECD countries, but also above that of the US and far above those of both France and Great Britain," states the Institute.

South Korea has shown the highest growth rate according to the study, with 4.4%. Finland, Sweden and Japan occupy the top five spots with rates of between 3.6 and 3.4%. Germany completes the top five with an estimated 3.0%. The US achieved 2.8%. The data refers back to 2012.

DIW found that since 2005, Germany has made up a lot of ground in R&D. "In recent years, there was only one country where research investment grew faster than it did in Germany, and that was South Korea," said DIW researcher Heike Belitz, who led the study.

 

 

The automotive sector benefits the most

85% percent of private research investment in Germany goes into the manufacturing sector. By comparison, this share stands at only 70% in the US, at just under 50% in France, and at 37% in the UK. In Germany, R&D expenditures are concentrated in only three sectors: automotive, computer and electrical engineering, and mechanical engineering. Nearly one-third of investments in Germany are made in motor vehicle construction alone.

The study also examined the relationship between investment in research and economic growth. "An increase in research investment leads to an increase in GDP in the following years," states Belitz. An increase in overall research investment growth by 1% leads in the short-term to an increase in GDP of about 0.05 to 0.15%, says the study. Germany fell into the top part of this range.

Public investment also grows

It wasn't just private investment that made inroads in the past few years. According to DIW, since 2007, there has been substantially stronger growth in public research investment, particularly in research institutes and universities.  "There has been substantially stronger growth in public research investment. To some extent we see a change of policy in this, but this momentum has contributed to the fact that Germany is in such good standing today," says Belitz.

However, the DIW researchers warn Germany against resting on its laurels. The public and private sectors should not let up in their efforts in the coming years: “For a country that owes its prosperity to a significant share of the R&D-intensive industry and production-related, knowledge-intensive services, research and development remain key prerequisites for future growth.”