In the period from 2022 to 2024, 41 percent – equivalent to 1.6 million firms – reported making at least one innovation during the preceding three years, according to a KfW study released on Wednesday. That represents a two‑percentage‑point rise over the 2021‑2023 interval. In 2024, companies spent 35.4 billion euros on innovation, an increase of 1.8 billion euros from the previous year, and a price‑adjusted growth of just under three percent.
Despite these modest gains, the KfW cautions that innovation activity among German SMEs has fallen markedly since the mid‑2000s. Furthermore, the focus of innovation is increasingly shifting toward a smaller number of larger firms. Recent data show that 73 percent of medium‑sized companies with more than 50 employees introduced an innovation, whereas only 37 percent of firms with fewer than five employees did. The larger companies also account for the majority of innovation spending.
Dirk Schumacher, chief economist at KfW, remarked that “it is encouraging that more firms are innovating, especially given the persistently difficult economic environment”. He added that “given the importance of the Mittelstand to the German economy, we cannot be satisfied with the current level of innovation activity-it has been significantly higher in the past”. Schumacher warned that productivity growth and the economy’s ability to transform would be permanently weakened if an increasing share of firms forego the regular renewal of their production processes and product offerings.