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09/23/2021

Why Germany is Losing the Innovation Battle

German policymakers need to better understand the distinction between invention and innovation

Dries Faems - 23. September 2021

Tips for Practitioners

- Expert opinion -

In the past several weeks, all candidates who maintain the ambition to become the new German Chancellor have emphasized the importance of Germany’s innovationpower to solve the most pressing societal challenges. Armin Laschet, Olaf Scholz, and Annalena Baerbock continuously refer to Germany’s history as a technological world leader to justify their optimism regarding the country’s ability to address and overcome crucial problems such as climate change and inequality.

At first sight, the results of the Global Innovation Index 2021, which were recently published by the World Intellectual Property Organization, seem to contradict the politicians’ perception of Germany’s leading position in the world of innovation. There is no Olympic medal for Germany in sight. While Germany consistently took ninth place in the past, it has slipped even further in these rankings, now sitting at #10.

Why do the perception German politicians have seem to differ from the hard facts? A core explanation may be that German politicians do not understand the distinction between invention and innovation. Invention refers to the ability to generate new ideas and technologies. Innovation, in contrast, refers to the ability to actually transform such new ideas and technologies into actual products and services that can be commercialized.

Taking a closer look at the most recent Global Innovation Index report, we can see that Germany is, indeed, a powerhouse when it comes to invention. In particular, Germany is the world leader in terms of patent applications, indicating that the German industry is exceptionally strong in generating unique ideas that have the potential to change the world. That being said, the country seems to struggle in actually transforming such novel ideas into new products and services. Again, the Global Innovation Index provides some interesting insights to explain why Germany is excelling in invention and yet struggling in terms of innovation. The report clearly indicates that Germany is lacking when it comes to digitalization. In the category “e-participation,” Germany ranks #57 this year (after placing at #23 in 2020). In the category “Government’s online service,” Germany tumbled from #17 (in 2020) to #59 this year.

Germany can be proud of being a world-class innovation generator. But, inventions can only have an impact on society when they are actually transformed in tangible products and services. Such transformation increasingly requires the presence of a strong public and private digital infrastructure as well as the ability to generate digital business models. And it is there that Germany is falling behind. The upcoming federal government coalition should therefore consider that innovation and digitalization are two sides of the same coin, and that extensive integration and intensive coordination is imperative.

Tips for Practitioners

  • Do not confuse invention with innovation! Not every great idea will produce a product or service that can be launched onto the market.
  • As a company representative or policymaker, you need to further accelerate your investments in digital infrastructure to leverage the exceptional portfolio of inventions generated in Germany.
  • Consider digital and innovation policy as two sides of the same coin!

Literature reference

The Global Innovation Index 2021 report can be downloaded here: https://www.wipo.int/global_innovation_index/en/2021/

Author

Professor Dries Faems

Dries Faems holds the Chair of Entrepreneurship, Innovation and Technological Transformation at WHU – Otto Beisheim School of Management. He is an expert on the topic of collaboration for innovation. In his teaching and research, he focuses on various phenomena, such as R&D alliances, collaboration for digital transformation, and innovation ecosystems. Professor Faems also is the coordinator of the WHU Innovation Ecosystem Hub, which aims to connect academics with practitioners to promote collaboration for innovation.

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