VDMA survey Germany remains the best R&D location

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VDMA survey shows: companies want to increase research and development in the coming years. Germany remains the most popular research location.

According to companies from the mechanical and plant engineering sector, Germany takes first place in the ranking of the most attractive research locations. The performance of the engineering sciences, the university and science system and R&D cooperation with other companies are rated particularly positively. These are the key findings of the VDMA's new survey on research and innovation, in which almost 400 companies took part. "Thanks to high-performance engineering sciences and established value-added networks, we have an outstanding innovation area in Germany," emphasizes Hartmut Rauen, Deputy Managing Director of the VDMA. "In Central Europe, with Germany as the center of gravity, we have a strong mechanical engineering cluster that is still unparalleled."

The USA is the second most attractive R&D location. The last of the 13 countries in the comparison is China. "For many companies in China, the risks seem to clearly outweigh the conceivable benefits," says Rauen. "The protection of know-how may not be sufficient from the companies' point of view." The majority of respondents (73%) also believe that their most innovative competitors are still in Germany. China (50 percent) and the USA (40 percent) follow in second and third place.

Two thirds conduct R&D exclusively in Germany

Overall, one in three companies carries out research and development abroad, in the vast majority of cases through its own foreign locations. The USA, India and China as well as the neighboring countries Austria and Switzerland play the most important role here. The most frequently cited reasons include local headquarters or a local production site, customer proximity, regional market requirements, personnel costs and personnel availability.

This also means that two thirds of companies conduct research and development exclusively at home. When asked why this is not done abroad, the answer is usually "no need" - especially if headquarters, production, technical expertise, important customers or important partners are available locally. From the companies' point of view, factors such as the risk of know-how drain and insufficient data security can also speak against research and development abroad.

More research and development planned

In the coming years, VDMA members intend to further increase their R&D activities - both in Germany and abroad. For example, 46 percent of those surveyed expect more research and development in Germany. Only 13 percent expect a decline. The result for R&D abroad is even clearer. Here, 68 percent want to increase their activities and only 5 percent are likely to reduce their commitment. Of those who do not yet conduct R&D abroad, 15 percent expect to do so in the near future.

"Mechanical engineering continues to keep up the pace of innovation, which benefits the entire location," says Rauen. "In almost all sectors, production, scaling and competitiveness are based on innovative mechanical engineering solutions." A total of two out of three companies have also used public funding programs for research and development in the last three years. Tax incentives for research ("research allowance"), which were introduced in 2020, are now in first place. It is the most frequently used instrument. "The research allowance is increasingly becoming a success story and directly increases our competitiveness," emphasizes Rauen. "The same applies to joint industrial research, which must finally be expanded financially in the current budget discussions."

Skilled workers are in short supply, especially in smaller companies

Companies' innovative strength is being hampered by bottlenecks in the labor market. Although these have eased slightly, they are still at a high level. For example, every second respondent still observes severe shortages of R&D specialists and every third of academics. Smaller companies are particularly affected. For many, the bottlenecks are leading to delays or even abandonment of R&D projects, a deterioration in their competitive position and loss of sales.

Bureaucracy and regulation are an increasing obstacle. 71% confirm that the innovative strength of their companies is severely or even very severely impaired because employees have to deal with bureaucratic tasks instead of having the time for research and development. Only 5 percent of the VDMA members surveyed do not share this view.

Curbing the unwanted outflow of knowledge

Furthermore, two out of three companies are of the opinion that publicly funded science deals too freely with knowledge generated in Germany. "The latest knowledge, speed and implementation expertise are decisive in the international competition for key technologies," emphasizes Rauen. "This knowledge must not be sent out into the world undifferentiated. Application-oriented research results and competition-relevant technologies from science are particularly important; passing them on can harbor risks for Germany and Europe".

The majority of companies surveyed are of the opinion that application-related findings should not be made transparent to competitors. However, one in two also say that it is crucial which countries are involved. Only 13 percent of companies are of the opinion that Germany benefits from science in other countries to at least the same extent as vice versa.

"The direct availability of application-oriented, cutting-edge knowledge, for example from the engineering sciences, is of existential importance for Europe and therefore also for the people who live and work here," says Rauen. "Freedom of science and openness are fundamental conditions for innovation - but not as an unsecured one-way street of knowledge transfer with branches to all possible competitor countries. We need general and binding guidelines for researchers and scientific institutions".