Why Germany Dominates the U.S. in Innovation

An article published last year in the Harvard Review of Business outlines a number of important factors about why Germany is more successful than the United States in fostering innovation in a commercial context.

Germany outperforms the US in a diverse range of fields, including sustainable energy systems, molecular biotech, lasers, and experimental software engineering.

While many people associate ‘innovation’ with stories such as Facebook and Twitter it turns out that countries such as Germany are far more successful at developing radical innovations.

Importantly, Germany has been more successful 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. This revolution in Germany is generally referred to as Industry 4.0

Among the major factors that the HBR attributes to Germany’s success, particularly in manufacturing, were the following:

  • Germany understands that innovation must result in productivity gains that are widespread, rather than concentrated in the high-tech sector. As a consequence, Germany doesn’t only seek to form new industries, it also infuses its existing industries with new ideas and technologies. For example, much of a new BMW is based on innovation in information and communication technologies, and many of the best German software programmers go to work for Mercedes-Benz.
  • Germany has a network of public institutions that help companies recombine and improve ideas. In other words, innovation doesn’t end with invention. The Fraunhofer Institutes, partially supported by the government, move radical ideas into the marketplace in novel ways.
  • Germany’s workforce is constantly trained, enabling it to use the most radical innovations in the most diverse and creative ways to produce and improve products and services.

Photo credit: “Colourbox”. Material used in the preparation of this article has been drawn from the Harvard Business Review.


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