Innovation has been at the center of the global conversation especially as countries, including Germany, have been defining survival paths in these uncertain times. The COVID-19 outbreak has essentially worked as a ‘readiness checkup’ for countries on their ability to innovate in the face of changing times. An economy’s response to megatrends, such as tech breakthroughs and the risks of climate change, can dictate its long-term success.

In 2020, this has been the key theme in Davos at the World Economic Forum’s annual assembly of political and business leaders in 2020. And again reflected in the annual Bloomberg Innovation Index for 2020. World Economic Forum’s annual assembly index assesses over 200 economies across weighted metrics.

The seven weighted metrics include: R&D Intensity, Patent Activity, Tertiary Efficiency, Manufacturing Value-added, Productivity, High-tech Density and Researcher Concentration.

While the Bloomberg Innovation Index identifies the world’s top 20 most innovative economies, based on the annual index created by Bloomberg. In order to create the ranking, the Bloomberg Innovation Index takes into consideration a variety of factors that contribute to an innovative economy. These include spending on research and development, productivity of manufacturing, efficiency of tertiary education, high-tech density, patent activity, and many more.

Under the World Economic Forum’s annual assembly index, Germany clinched the top spot for the most innovative economy, ending South Korea’s winning streak. The European nation scores in the top five for its manufacturing value-added, high-tech density, and patent activity metrics. However, even winners have some room for improvement. As the global economy sways ever more in the direction of services over manufacturing, and could improve its rate of higher education to achieve an even better score on the index.

Under the Bloomberg Innovation Index for 2020, Germany takes the second lead after Switzerland, narrowly surpassing South Korea, which was on a six-year streak. Germany also ranked in the top five for value-added manufacturing, high-tech density and patent activity. It was able to narrowly overtake South Korea due to the latter’s slight decrease in productivity this year.

The manufacturing sector, which is highly productive and competitive, is a large source for innovation . However, it falls behind by a large margin on its service sector innovation. A large proportion of its resources are spent on the automobile industry.

While car manufacturing is a major driver in the German economy, recent concerns over climate change and sustainable development have the potential to disrupt this. The country also spends most of its funds on the manufacturing industry, leaving the tertiary sector somewhat neglected. This could be dangerous within a global economy that is shifting towards the service sector.

Why Invest in Germany?

With 82 million inhabitants, Germany is the European Union’s most populous country and therefore also the largest market within the EU. With a gross domestic product of more than 2.2 trillion euros, being the largest economy in Europe and the third strongest economy in the world. its central location in Europe makes it a hub for goods and services, and is especially benefitting from the EU enlargement.

Being an open market and warmly welcomes foreign investors. That is demonstrated by the 22,000 foreign enterprises that have established businesses in the country and now employ more than 2.7 million people. The German market is open to entrepreneurial investment in practically all areas. There are no longer any state-controlled industries. the country is receiving increasing attention from private equity firms and hedge funds due to its highly attractive companies and favourable investment conditions.

Germany offers an exceptionally well-qualified, motivated and conscientious workforce. German employees’ high standard of knowledge and skills are internationally recognised. The demand for professionals is met by 383 institutions of higher education. Another pillar of the German training system is the “dual system” of vocational education, which combines workplace training and school instruction and produces an acknowledged high standard of training closely oriented towards the needs of industry.

Statistically, the country has 277 international patents per one million inhabitants – more than anywhere else in the world. The close cooperation between industry and world-famous research institutions like the Max Planck and Fraunhofer Institutes swiftly transforms new ideas into products for the world market. the country has a closely knit network of roads, railways and international airports. That guarantees swift connections.

Germany is a modern constitutional state with transparent and reasonable laws. The advantages are internationally recognised. The German legal system has served as a model for legal systems in many other countries. International studies demonstrate that German legal security is highly regarded by investors. Among all countries, Germany ranks fourth in terms of legal security.

Valsen Fiduciaries Group Solutions

At Valsen Fiduciaries Group, our experienced staff, combined with our global network, allow us to provide the ongoing support you need – wherever you need it, at home and abroad, whatever the size of your organisation. To learn more about how your business can draw benefits from setting up in Germany, please contact us today.