In Germany, the concentration of research and development in mid-tech sectors weakens the country’s competitiveness and holds back economic growth. This conclusion was reached by Ifo Institute researchers Oliver Falck and Yuchen Guo, Anadolu Agency reports.
The study’s authors identified an innovation deficit, known as the mid-tech trap, as one of the reasons for Europe’s weak economic growth. According to their data, economies with higher growth rates direct a larger share of research and development spending toward high-tech fields, including biotechnology, hardware and software, and the aerospace industry.
In contrast, research and development in Germany are largely concentrated in mechanical engineering and automotive manufacturing, which belong to mid-tech sectors. In 2023, high-tech industries accounted for 20% of German manufacturing’s research and development spending, while the figure stood at 68% in the United States.
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The share of mid-tech sectors in German manufacturing’s research and development spending reached 76%, exceeding the sample average of 56%. At the same time, the share of high-tech areas in the country declined from 32% in 1995 to around 20% in 2023.
The researchers analyzed data from 18 countries for 2000–2024. They found that a 10-percentage-point increase in the share of research and development spending in high-tech sectors is associated with a 0.5-percentage-point increase in annual per capita economic growth in the medium term. At the same time, they found no direct link between total research and development spending and per capita economic growth. The authors urged policymakers not to limit themselves to quantitative funding targets and to reform the conditions for innovation.
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