The Munich-based Ifo Institute is advocating for a revised approach to German innovation policy, emphasizing a shift in funding priorities to secure sustainable economic growth. According to a recent study released by the institute, fostering innovation, particularly in key technologies such as artificial intelligence, biotechnology, microelectronics and quantum technology, is crucial.
Currently, government support tends to favor large-scale projects undertaken by established corporations. The Ifo Institute proposes a “mission-oriented” innovation policy model that would focus on addressing significant societal objectives – such as achieving climate neutrality or advancing digitalization – and encouraging competition for the most effective solutions.
The study highlights a trend where private research and development (R&D) investment is concentrated in traditional sectors like the automotive and mechanical engineering industries, while emerging fields remain comparatively underfunded. To meet the coalition government’s goal of increasing annual R&D spending to at least 3.5 percent of GDP by 2030, the institute suggests incentivizing greater private investment in these future-oriented areas. A mission-oriented policy could facilitate this by setting objectives without preferentially supporting specific industries.
For such a policy to be effective, robust frameworks are essential – encompassing institutions possessing specialized expertise, competitive elements in the allocation of funding and operational independence from short-term political considerations. Improved conditions for start-ups and private investors are also deemed vital. While acknowledging that a mission-oriented policy isn’t a singular solution, Oliver Falck, head of the Ifo Center for Innovation Economics and Digital Transformation, warned that without a strategic shift, Germany risks falling behind internationally in critical future technologies.