Why Germany Dominates the U.S. in Innovation
May 28th, 2014Via: Harvard Business Review:
Reading the headlines, you might think that the most urgent question about national success in innovation and growth is whether the U.S. or China should get the gold medal. The truth is: Germany wins hands down.
Germany does a better job on innovation in areas as diverse as sustainable energy systems, molecular biotech, lasers, and experimental software engineering. Indeed, as part of an effort to learn from Germany about effective innovation, U.S. states have encouraged the Fraunhofer Society, a German applied-science think tank, to set up no fewer than seven institutes in America.
True, Americans do well at inventing. The U.S. has the world’s most sophisticated system of financing radical ideas, and the results have been impressive, from Google to Facebook to Twitter. But the fairy tale that the U.S. is better at radical innovation than other countries has been shown in repeated studies to be untrue. Germany is just as good as the U.S. in the most radical technologies.
What’s more important, Germany is better at adapting inventions to industry and spreading them throughout the business sector. Much German innovation involves infusing old products and processes with new ideas and capabilities or recombining elements of old, stagnant sectors into new, vibrant ones.
Germany’s style of innovation explains its manufacturing prowess. For example, many, if not most, of the Chinese products we buy every day are produced by German-made machinery, and the companies that make them are thriving.
It also explains why Germany’s industrial base hasn’t been decimated, as America’s has. Germany is better at sustaining employment growth and productivity, while expanding citizens’ real incomes. Even with wages and benefits that are higher than those in the U.S. by 66%, manufacturing in Germany employed 22% of the workforce and contributed 21% of GDP in 2010. The bottom line: German manufacturers are contributing significantly to employment growth and real income expansion.
In the U.S., by contrast, fewer and fewer people are employed in middle-class manufacturing jobs. In 2010, just under 11% of the workforce was employed in manufacturing, and manufacturing contributed 13% of GDP. Inequality is on the rise, and the country’s balance of payments is getting worse.
