The Expert Commission for Research and Innovation (EFI), including IfM President Prof. Dr. Dr. h.c. Friederike Welter, today presented its new annual report to Federal Chancellor Friedrich Merz. This report emphasises the importance of innovation for the competitiveness of German SMEs.
The Mittelstand enterprises (SMEs) – i.e. companies in which ownership and management coincide – represent the majority of companies in Germany, and their innovation activities are therefore crucial to the innovation landscape in Germany. Taking into account characteristics such as company size and industry affiliation, Mittelstand companies are more successful than comparable non-SMEs in introducing product or process innovations.
It is also remarkable that, despite lower innovation expenditure, they were able to achieve higher sales shares with product innovations. However, their innovative capacity is hindered by obstacles such as a shortage of skilled workers and bureaucracy. "Mittelstand enterprises come up against administrative and personnel limitations when implementing innovative ideas. In order to strengthen their innovative capacity, measures to promote innovation, reduce bureaucratic burdens and secure skilled labour must be implemented," explains EFI Chair Prof. Dr Irene Bertschek from the ZEW – Leibniz Centre for European Economic Research in Mannheim.
Simplifications in the application process for innovation funding are necessary
Entrepreneurial innovation activities are supported by a range of government funding measures. In particular, the research allowance introduced in 2020 has proved very popular. "Taking advantage of existing funding opportunities often involves a series of bureaucratic requirements that pose a greater hurdle for smaller companies in particular. Therefore, a simplified application process and significantly simpler and more automated processes are needed for accessing research funding, especially the research allowance," says Prof. Dr. Dr. h.c. Friederike Welter.
Reducing bureaucratic barriers
"In order to promote innovation, especially among the MIttelstand enterprises, the Federal Government should consistently reduce bureaucracy, for example by simplifying administrative and approval procedures, " demands Welter. The modernisation agenda of the federal and state governments should be pushed forward to this end. In addition, knowledge and practical experience should be systematically incorporated into regulatory processes in order to make new regulations understandable, comprehensible and practical. Practical checks are a particularly suitable tool for this purpose. The once-only principle, i.e. avoiding the repeated submission of data, for example in the case of registration and reporting obligations, leads to a significant reduction in bureaucratic burdens.
Facilitating the immigration of skilled workers
The immigration of skilled workers should be made significantly easier and the relevant procedures should be accelerated. A central digital platform based on the once-only principle could bundle all procedures for entry, recognition of qualifications and granting of residence permits. The "Work and Stay Agency" outlined in the coalition agreement can take on this role. "Without qualified professionals, the Mittelstand enterprises cannot realise their innovation potential. A practical design of the Work and Stay Agency, regular evaluations and a noticeable reduction in the burden on companies, professionals and students are crucial here," says Bertschek.
