Structural Differences at the Root of East-West Gap in Research, Development, and Innovation in Germany

Abstract

Over the past two decades, research and development (R&D) activities in eastern Germany have increased substantially, albeit to a lesser extent than in western Germany. Furthermore, R&D in eastern Germany was primarily conducted by research in the government sector and less so by universities and businesses. In 2013, overall, R&D activities in eastern Germany reached 86 percent of the western German level; in the private sector, eastern Germany reached just under 50 percent of the western German level. The comparatively low level of R&D activity in eastern Germany’s private sector is due to the economic and corporate structure: compared to the western German average, in eastern Germany the research-intensive sectors are not as well established and there are also fewer larger enterprises that generally perform a higher percentage of R&D work than smaller ones. The number of new products launched by companies as a share of the turnover is far lower than for western German firms, and this gap was found to further increase in recent years. Although the German government continues to grant a certain “east bonus” in its backing of private-sector R&D, structural differences will mean that no noticeable convergence towards the western German level can be expected in the near future. Significant regional differences in private-sector R&D activities have also been observed in western Germany.