“fib. FRANKFURT. One in two companies within Germany’s SME sector has produced at least one innovation in recent years—whether as a product or a process. However, only nine percent of these firms maintain an active in-house innovation policy or operate their own dedicated research and development departments. The larger the companies, the more frequently they invest in their own research. The majority of the many small companies, by contrast, engage in such activities only on an ad-hoc basis, if at all.
These are among the findings of the annual report by the Commission of Experts for Research and Innovation (EFI), which was recently presented to Federal Chancellor Merz in Berlin.
As the Commission reports, when viewed over the past twenty years and measured relative to companies' respective revenues, corresponding innovation expenditures have declined significantly. The reasons cited include high costs, bureaucratic hurdles, and a shortage of skilled workers.
The report by the Commission—chaired by Irene Bertschek—states: "Innovating companies are more productive than non-innovating companies with comparable characteristics." "This disparity is more pronounced within the SME sector—particularly when investments are made in both innovation and digitalization." Many companies, it is argued, are steering themselves into the future with the handbrake on. To release these brakes, the state, not least, is called upon to act.
The Act on the Tax Promotion of Research and Development—introduced in 2020 as a new instrument in the form of a research allowance—has already yielded some successes in strengthening corporate innovation activities and, by extension, Germany as a business location.
After the government repeatedly refined its support mechanisms—broadening the assessment base, increasing subsidy rates, and raising the aid ceiling—the total aid package now amounts to four billion euros. Half of this sum is allocated to small and medium-sized enterprises (SMEs). However, money alone is not enough.
According to the EFI, administrative and approval procedures on the part of the relevant government agencies could be streamlined quickly and tangibly. In this way, these agencies could significantly simplify the application process for state funding instruments such as the research allowance. Such measures would include relaxing proof and documentation requirements or utilizing data already collected by the authorities for subsequent applications. Many of these regulations, the researchers note, may be important and appropriate in their own right; however, taken collectively, they constitute a burden for companies.
In surveys, just under half of the companies polled indicated that, due to the bureaucratic effort required of them, they have too little time left for actual innovation work. Eliminating redundancies in reporting obligations would be a good first step. The current federal government is moving in the right direction with its "one in, one out" principle—a policy intended to ensure that the introduction of any new regulation leads to the elimination of at least one existing rule, thereby minimizing bureaucratic burdens for all stakeholders, at least in a stepwise fashion. However, much still falls through the cracks in this regard. The actual administrative burden associated with individual regulations is not being adequately reflected. Moreover, there is no guarantee that the respective regulations are targeting the right and the intended recipients.” [1]
1. Forschungsexperten für Stärkung der Mittelstands-Forschung: EFI-Jahresgutachten vorgestellt. Frankfurter Allgemeine Zeitung; Frankfurt. 13 Feb 2026: 27.
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