Germany has become more attractive as a research location, but

EFI Chairman Uwe Cantner (4.f.l.) presents the report to Federal Chancellor Olaf
EFI Chairman Uwe Cantner (4.f.l.) presents the report to Federal Chancellor Olaf Scholz (4.f.r.). Image: David Ausserhofer

The Commission of Experts for Research and Innovation (EFI), chaired by Uwe Cantner from the University of Jena, presented its new annual report to Federal Chancellor Olaf Scholz on 28 February 2024. The report focuses on topics such as international mobility in the science and innovation system, evaluation studies on research and innovation policy measures, the development and use of artificial intelligence (AI), new technologies for sustainable agriculture, social innovations and what a transformative R&I policy should look like.

Intense international competition for skilled labour

With international mobility in the science and innovation system, the EFI is taking up a topic that it already addressed in 2014. At that time, it gave the Federal Government a poor report card and called for massive efforts to offer internationally mobile scientists and research and development employees competitive working and research conditions. Since then, international competition for these skilled workers has become even more important and much has been done to offer them attractive conditions in Germany. Not without success, as the new analyses by the Expert Commission show. However, many bright minds continue to decide against Germany as a research location - not least due to inefficient and time-consuming administrative processes for immigration.

"For a competitive location for science and innovation," says Professor Uwe Cantner from the University of Jena and Chairman of the Commission of Experts, "efficient personnel at universities, research institutions and companies is indispensable. Like the economy as a whole, the German science and innovation system will also be affected by staff shortages as a result of demographic ageing, which is why it is increasingly reliant on researchers from abroad." Cantner continues: "Scientific analyses show that country-specific factors have a major influence on which locations these people choose for their work. The Federal Government has a central role to play in creating competitive working and research conditions and in shaping the framework conditions for international mobility of researchers."

Many evaluation studies are methodically inadequate

Many of the evaluation studies on research and innovation policy measures carried out on behalf of the Federal Government do not allow any conclusions to be drawn as to whether the policy measures analysed were effective and led to the intended results. To what extent do the federal government’s research and innovation policy measures - including project funding and innovation advice - contribute to the creation of new findings, inventions and business models? And do these measures help to tap into new value creation potential and better manage transformation processes?

These questions are becoming ever more pressing in times of empty public coffers and increasing pressure to transform. The evaluation studies commissioned by the federal government should actually provide information on how effective the measures analysed are. "So far, however, this has hardly been the case," says Professor Guido Bünstorf from the University of Kassel and member of the Comission of Experts, "because most evaluation studies do not meet the methodological requirements for a meaningful impact measurement."

Germany falls behind in technology development

Germany and the European Union (EU) urgently need to catch up in the development and use of artificial intelligence (AI), emphasizes the EFI. "China and the USA dominate technology development in the field of AI, while Germany and the EU are falling behind," says Professor Carolin Häussler from the University of Passau and member of the Commission of Experts, based on an international comparison of scientific AI publications and AI patents. "Germany and the EU are also not leading the way in the development of large language models and multimodal models, which serve as basic models for a wide range of AI applications," adds Häussler.

The Commission of Experts is concerned that Germany is lagging behind in the field of AI. "There is a risk of losing technological sovereignty as a result," states Häussler and explains: "Technological sovereignty in the field of AI presupposes that Germany, together with the EU, can provide and further develop AI technologies itself or has the opportunity to obtain and apply these technologies without being unilaterally dependent on other economic areas."

Agriculture faces major challenges

Agriculture is currently facing major challenges: global population growth, adaptation to climate change, the decline in agricultural land as well as biodiversity loss and groundwater pollution caused by agriculture itself. Professor Till Requate from Kiel University and member of the Commission of Experts makes it clear: "In future, agriculture will have to produce larger quantities of food with less environmentally harmful substances such as pesticides and fertilisers. At the same time, land areas are shrinking and climate conditions are changing. In the new EFI report, we show that the use of precision technologies and ’smart farming’ as well as green genetic engineering products can help in tackling these diverse challenges and thus advance the transformation of agriculture."

Improving the data basis

The EFI emphasizes the need for social innovations which, in conjunction with technological innovations, can contribute to overcoming the major challenges facing society. The Commission of Experts defines social innovations as new individual and collective behaviours and forms of organization that contribute to solving social or economic problems and thus create added value for society. The six-member Commission of Experts supports the National Strategy for Social Innovation and Social Enterprises adopted by the German government in September 2023. At the same time, however, it also emphasizes the need for further action. 

Tackling the transformation of the economy and society

The Federal Government has taken over a task from its predecessor for which there are no role models and no master plan: managing the transformation of the economy and society. This includes the energy and mobility transition, the creation of sustainable agriculture and the digitalization of the economy and society. "The success of the transformation requires a large number of technological and social innovations that will change the way we use technology as well as production, consumption and our individual behaviour towards nature and society," predicts Professor Uwe Cantner.

Accordingly, the task of shaping policy is a major one. Taking on this task will not be easy for the current federal government. After all, other current crises, be it the war in Ukraine, the disintegration of the global economy or the recessionary after-effects of the coronavirus pandemic, require decisive action and high financial commitments. "The result is intensified competition between long-term transformation orientation and short-term crisis management for government budgets," says Cantner. 

    In its 2014 annual report, the Commission of Experts recognized that the German Federal Government was only moderately successful in the global competition for internationally mobile researchers. New analyses presented by the Commission of Experts in its current report show that Germany has been on a positive development path since then. The Commission of Experts is currently recording a net influx of scientists. Analyses of patent data also indicate that Germany has become more attractive as a business location. However, the bottom line is that more inventors are still leaving than coming to Germany.

    "However, it would be too short-sighted to draw conclusions from pure emigration and immigration figures in a specific period," emphasizes Professor Carolin Häussler from the University of Passau and member of the Commission of Experts. "Our data shows that many researchers return to Germany after spending several years abroad. In principle, such circular migration movements are very welcome, as researchers gain valuable experience abroad, expand their network and then often return to their home country even more productively. Germany should therefore promote international mobility and create the most attractive conditions possible for returnees."

    Digitalized and transparent administrative system

    In view of demographic ageing and the worsening shortage of skilled labour, the Commission of Experts calls for further reforms in favour of international mobility in the science and innovation system. It sees a bottleneck in the lengthy and complex administrative processes that researchers face on their way to Germany.

    In order to accelerate the immigration process, the Commission of Experts recommends the development of a comprehensive digital system that integrates all sub-processes of skilled labour immigration into an overall process and links all stakeholders involved. It also recognizes significant potential for improvement with regard to non-transparent pension entitlements in the context of civil servant status for academics and in the harmonization of legal framework conditions at EU level.

    International orientation of new tenure track programme

    The results presented by the Commission of Experts suggest that sponsorship programmes to attract top international researchers, such as the Alexander von Humboldt Professorships, help to improve Germany’s attractiveness as a centre of science and research. However, the success in the top segment is offset by the fact that researchers who leave are generally more likely to publish than those who come to Germany for the first time. Professor Guido Bünstorf from the University of Kassel and also a member of the Commission of Experts therefore recommends: "International mobility should be promoted across the entire breadth of the science sector, for example by expanding the federal-state programme for the creation of tenure track professorships with a clear focus on international careers."

    Bünstorf is cautiously optimistic: "Germany has great potential to take a leading position in the competition for internationally mobile researchers. Living and working conditions are also attractive in an international comparison. However, the existing obstacles are not new. Only if unnecessary bureaucratic obstacles to immigration are removed and employment relationships in science are more consistently designed to be compatible with the international labour market can Germany as a location for science and innovation realize its full potential."

    For its annual report, the Commission of Experts analysed 81 publicly accessible evaluation studies from the areas of responsibility of the Federal Ministry of Education and Research (BMBF) and the Federal Ministry for Economic Affairs and Climate Action (BMWK), which were written between 2009 and 2023. In 59 of these 81 studies, observed developments were causally interpreted as effects of the respective measures.

    However, only in seven cases did the methods used allow such statements about cause-and-effect relationships to be made at all. As a result, the evaluation studies analysed contribute very little knowledge about whether the objectives of the respective measures were achieved. "With a better knowledge base, policy measures could be specifically adapted and their effectiveness improved," says the Chairman of the Commission of Experts, Professor Uwe Cantner from the University of Jena. "A lack of knowledge prevents policy learning."

    Creating the conditions for a learning policy

    The Commission of Experts calls on the Federal Government to put evaluation studies out to tender in future in such a way that the terms of reference include a causal analysis and minimum requirements for the evaluation concept in this regard. The conditions for this must also be improved by politicians, for example with regard to access to the necessary data. "Anyone planning a research and innovation policy measure must also ensure that the data required for a causal analysis can be collected," says Cantner.

    The bodies responsible for implementing a measure should systematically make all documents associated with a measure available to the evaluating organizations. The Commission of Experts also considers it necessary for all commissioned evaluation studies to be published, regardless of their results. Both positive and negative results of evaluation studies should be valued equally as progress in knowledge.

    AI is a key technology that will have a decisive impact on technological and economic development in the coming years. "AI can open up innovation and growth potential in many technology areas and sectors, such as production technology or the pharmaceutical industry," explains the Deputy Chair of the Commission of Experts, Professor Irene Bertschek from ZEW - Leibniz Centre for European Economic Research in Mannheim. "In order to utilize the potential of AI, it must also be used across the economy," says Bertschek.

    A representative survey conducted on behalf of the Commission of Experts shows that this is not yet the case. In 2023, 10 per cent of companies in the manufacturing sector and 30 per cent of companies in the information industry in Germany were using AI. Around a further quarter of companies in both sectors planned to use AI in the future. Only very few companies, six per cent in the manufacturing sector and 15 per cent in the information industry, said that their own company was highly competitive in the field of AI. 

    The study also shows that there are a number of inhibiting factors preventing the wider use of AI. "Companies in both the manufacturing sector (72 per cent) and the information industry (68 per cent) perceive the lack of time and personal resources as the biggest obstacle. In addition, many companies are still uncertain about the expected benefits and have concerns about the maturity and reliability of AI. A lack of knowledge in companies and a shortage of skilled labour are further factors that inhibit the use of AI," says Bertschek, summarizing the results of the survey on the obstacles to the use of AI.

    AI ecosystem has a key role to play

    In the field of AI, it is important not to lose touch with international technological developments and not to become even more dependent on non-European providers. "Germany and the EU still have the opportunity to play a significant role in international technology development through innovation," emphasizes the Chairman of the Commission of Experts, Professor Uwe Cantner from the University of Jena. "However, this is not a sure-fire success and the race to catch up must be set in motion quickly. This requires a strong European networked AI ecosystem with excellent basic research, an efficient AI infrastructure and specialists with AI expertise," says Cantner.

    "The German government should continue to strongly support basic AI research. In addition, the development of suitable high-performance computers should be driven forward quickly, as there is a lack of computing capacity in Germany, which is a prerequisite for the training and application of AI models. It is also essential to establish a competitive data infrastructure," adds Bertschek. Well-trained specialists are also needed. "The German government should therefore endeavour to ensure that AI skills are taught in school, academic and vocational training," says Cantner. "In addition, initiatives that promote open source development can contribute to technological sovereignty in Germany and Europe," emphasizes Häussler.

    Digital and smart technologies can be used in agriculture to apply inputs more precisely and thus save on pesticides and fertilisers, for example. Through these savings, precision technologies also contribute to reducing the environmental impact of agriculture. "Some farms are already using technologies such as farm management systems or digitally supported agricultural machinery. However, there are still obstacles to the widespread use of such technologies," explains Professor Irene Bertschek from ZEW Mannheim and member of the Commission of Experts.

    These hurdles include the high acquisition costs of precision technologies and the fact that the use of pesticides and fertilisers is comparatively cheap, but at the same time the negative environmental effects are not sufficiently taken into account. "In order to increase the use of new, environmentally friendly precision technologies, a tax on pesticides and fertilisers is needed," demands Professor Uwe Cantner from the University of Jena and Chairman of the Commission of Experts.

    Other hurdles include compatibility problems between products from different manufacturers and inadequate infrastructures for networking and the collection and utilization of data. "In order to fully utilize the potential of digital and smart technologies, a Germany-wide, standardized data space should be created for agriculture," Cantner continues.

    Legal framework for green genetic engineering is outdated

    Green genetic engineering can be used to adapt crops so that they are more climate-resilient, more nutritious and richer in nutrients and require less use of pesticides and fertilisers. Developments in genome editing in particular make it possible to precisely implement such adaptations. Green genetic engineering could therefore be used to contribute to the goals of the Green Deal, for example. "In Germany and the EU, however, the potential remains untapped due to an outdated and inconsistent legal framework that is not scientifically sound," explains Bertschek. 

    This legal framework not only restricts research in the biotechnology sector, but also the competitiveness of agricultural production in the EU. "For this reason, the current legal framework must be revised and regulation independent of the breeding process must be established, as no risks inherent to the process can be identified," emphasizes Cantner. "Another major obstacle to the use of green genetic engineering is the low level of acceptance among the general public, who therefore need to be informed about green genetic engineering on a sound scientific basis. Such a communication strategy by the German government should also be reflected in consistent legislation," Requate continues.

    Evidence-based research and innovation policy requires representative, standardized and high-quality data in order to develop strategies and funding measures, evaluate them and thus enable concrete political measures. In its annual report, the Commission of Experts supports the development of cross-departmental key figures and a meaningful scientific database as outlined in the National Strategy for Social Innovation and Social Enterprises.

    At the same time, it recognizes the need to integrate existing data sets into an overall concept in the best possible way. "The development of key figures and data collection on social innovation must be designed in such a way that it is possible to properly measure the success and analyse the impact of policy measures to promote social innovation," says the Chairman of the Commission of Experts, Professor Uwe Cantner from the University of Jena.

    "The aim must be to establish a comprehensive, representative database that is consistent over a longer period of time," continues Professor Friederike Welter, President of the Institute for SME Research Bonn and member of the Commission of Experts. "We are aware of the hurdles involved in establishing a standardized and representative database. The diversity of definitions of social innovations makes this task even more difficult."

    Social innovations also from profit-orientated companies  

    Social enterprises are often perceived as particularly important sources of social innovation, as this type of company combines financial sustainability with social commitment. However, the Commission of Experts emphasizes that profit-orientated companies also generate, implement and disseminate social innovations. "It is particularly companies in research-intensive industries and knowledge-intensive services that also initiate social innovations," says Friederike Welter.

    "Social innovations are often found in internal company processes, for example in the form of working from home, flexible working life models or mentoring programmes," adds Cantner. "However, products and services are also offered that enable users to adopt socially innovative behaviour, such as tutoring platforms or telecare."

    Opening up existing funding formats 

    Social innovations should be an important part of the design of existing funding programmes due to their importance in relation to societal challenges. "The promotion of social innovations does not require special programmes tailored solely to them, but should be integrated into existing innovation promotion programmes. In this way, the mutual reinforcement between social and technical innovations can also be taken into account in funding decisions," states Cantner.

    "As with technological innovations, the financing of innovation activities is also a major obstacle to innovation in the case of social innovations," continues Cantner. In addition to promoting the emergence of social innovations, the transfer and trialling of locally successful social innovations in other contexts should also be an important component of funding. "The platform for social innovations provided for in the National Strategy for Social Innovation and Social Enterprises is particularly important for their further dissemination," emphasizes Welter. 

    The Commission of Experts states that the German government has recognized the need for transformation and has also taken the first steps in the right direction. "However, the transformation-orientated policy has so far been inconsistent. Many measures are not well coordinated in terms of timing or content," criticizes Uwe Cantner

    "This means we are losing valuable time, which could prove detrimental to further development. After all, at the beginning of the legislative period, we had much better economic conditions in Germany to drive forward the transformation policy with vigour. Now we have to manage the transformations out of an economic stagnation and in the context of massive foreign policy threats."

    The EFI therefore fears that the long-term transformation orientation could give way to a more short-term crisis management policy. This would make the success of the transformations a distant prospect.

    Considering long-term goals even in the short term 

    In order not to jeopardize the transformation of the economy and society, the Commission of Experts recommends that the German government consider long-term and structural objectives in short-term measures. "For example, the funds from the Bundeswehr special fund should also be used for research into cyber security and artificial intelligence," advises EFI Chairman Cantner. "After all, the overlap between military and civilian research is comparatively large and there is a direct link to the digital transformation."

    Factoring social compensation into transformative change

    Furthermore, political measures should be designed in such a way that they take into account the social problems of transformative change from the outset and ensure social compensation. As an example of how this should not be done, Cantner refers to the Building Energy Act: "The original failure to take social aspects into account has shown how quickly society’s willingness to transform can be severely damaged."

    Leaving the search for innovative solutions to the market

    According to the expert commission, it is also important not to rely too heavily on the state in the search for innovative solutions to existing problems, but rather to leave this to the economy. "This approach implies that solutions to transformation problems should primarily be developed and found in a market context," says Jena economist Cantner.

    "The state can initiate the development from an old, no longer desirable technology to a new technology through start-up investments and cleverly set incentives. After that, however, it should leave the further development of solutions to the market. A policy of this kind relies on the creativity and motivation of the players and is therefore in contrast to a ’classic’ policy of bids and bans, in which politically prescribed solutions have to be implemented."

The Commission of Experts for Research and Innovation (EFI), based in Berlin, has been providing scientific policy advice to the Federal Government since 2008 and presents an annual report on research, innovation and Germany’s technological performance. The main task of the EFI is to analyse the strengths and weaknesses of the German innovation system in an international comparison and over time and to assess the prospects for Germany as a location for research and innovation. On this basis, the EFI develops proposals for national research and innovation policy.