Prof. Dr. Wolfgang Franz: Using potential – Baden-Württemberg faces economic challenges

Baden-Württemberg is the home of glob­al players such as Bosch, Daimler and SAP. International companies such as ABB, IBM, Roche and Michelin are represented here with their German or European head offices. “Hidden champions” such as Voith in Heidenheim an der Brenz and Trumpf in Ditzingen are also based here. As well as internationally active and ma­­jor company groups, small and medium com­­panies (SMEs) in Baden-Württemberg are also very competitive in Germany and inter­­nation­ally. These innovative, flex­­ible SMEs em­­ploy about two thirds of all employees in Baden-Württemberg and earn half of its gross domestic product (GDP).


To a large extent, Baden-Württemberg’s economy is characterized by manufacturing. Most of the company names are well known. A comparison with other EU states, the USA and Japan shows that in Baden-Württemberg, with its 40 per cent share of manufacturing of gross value added and a 60 per cent share of the services sector, manufacturing is still a consider­­able heavy­­weight. More than in other industrial eco­­n­omies. Motor vehicle and component manufac­tur­­ing, mechanical and plant en­­gineering, metrology and med­­ical techno­l­ogy, pre­­ci­­sion engineering, op­­tical engi­­neer­­ing and electrical en­­gi­­neer­­­ing are particularly strongly represented in Baden-Württemberg. And many pharma­­ceu­­­tical companies are also represented here.

Many companies in Baden-Württemberg, especially in the sectors mentioned above, are not only active at national level but also participate in the global competition. Due to their high technological competence, they hold their own very success­fully against competitors from Asia, Europe and North America.


However, competitive strength in Baden-Württemberg is not borne by the major company groups alone; a large share is also due to the commitment of a large number of very innovative companies.According to a study by the Centre for European Economic Research (ZEW) in Mannheim, their high innovative perfor­m­­­ance originates especially from a spe­­cific customer structure characterized by R&D-oriented sectors and a broad spread of innovative strategies based on technological leadership.

So it is not surprising that R&D capacity is concen­trated in Baden-Württemberg to an extent not found anywhere else in Germany and only in very isolated places in European capital city regions elsewhere. Indicators such as high levels of R&D ac­­tivity, the number of employees in R&D and the number of patents are just as much evidence of Baden-Württemberg’s position as one of the main “knowledge states in Europe” as are its excellent results in the Excellence Initiative or­­gan­­­ized by the German federal and state governments and in the top cluster com­­petition organized by the German Federal Ministry of Education and Re­­search (BMBF). In addition, twelve of the 80 Max Planck Institutes, 14 of the 57 Fraunhofer Institutes and 25 per cent of the research capacity of the Helmholtz Association of German Research Centres are located in Baden-Württemberg.

As the basis for innovative products,
pro­­duction processes and services, R&D is of major importance. An important basis for the top position in R&D is the positive cooperation of many research-intensive companies with excellent
R&D service companies, efficient univer­sities and non-university facilities. In Baden-Württemberg more patent applications are submitted than in any other German state. Proof of its research strength is also its placing in the Excel­lence Initiative orga­nized by Germany’s federal and state governments, in which Baden-Württemberg was the most
successful state in Germany. Of the 1.9 billion euros available for the Excellence Initiative, 621 million go to universities in Baden-Württemberg. In the top cluster competition organized by the German Federal Ministry of Education and Re­­search, Baden-Württemberg’s research centres and companies are also well-placed. To date, support for ten top clusters in Germany has been approved. At four of these, companies and research centres from Baden-Württemberg are involved to a major extent. These are: the Bio-technology cluster and the Forum Organic Electronics in the Rhine-Neckar me­tro­politan region, the Software cluster and MicroTEC Südwest.


With its business and research infra­struc­­ture, Baden-Württemberg is well positioned in the international competition, which means that the conditions for the competitive and technological lead of the commercial sector and preserving employ­­ment in Southwest Germany are given.
However, providing intensive support to new trendsetting fields of technology as well as to those sectors that already exist, is vitally necessary.

In this context, infor­­mation and commu­ni­­cation technologies should also be men­­tioned, along with bio­­technology, nano­technology, energy tech­­nology and en­­vironmental technology. One essential basis for successfully work­­ing in technology areas and retaining or further expanding strengths in already strong sectors are highly qualified, skilled em­­ployees, especially with engineering or science degrees or with technicians’ quali­­fications. However, due to its high involve­­ment in R&D, its strong industrial sector and the numerous internationally active SMEs, and in spite of its own well-established education system, Baden-Württemberg is a major importer of qualified and highly qualified em­­ployees. At 52 per cent, the quota of skilled industrial workers in Baden-Württemberg occupies an international top position. Due to the demographic devel­­op­­ment and in order to compete with other states which have made major investments in education and vocational training in the future, Baden-Württemberg must create incentives and encourage more young people to complete a tertiary degree, a master tradesman’s, journeyman’s or a skilled tradesman’s qualification. Only when this succeeds will Baden-Württem­berg be able to exploit its po­­tential as a high-quality business location in future. Recommendations on how this might succeed are available from the Baden-Württemberg Innovation Council, which was established by the state government. More than 50 personalities of economy, sciences, culture as well as representatives of municipalities, associations and chambers belong to the council.

wfr1The author studied economics at the University of Mannheim and completed a doctorate in 1974. He has been president of the Centre for European Economic Research (ZEW) in Mannheim and has been professor of economics at the University of Mannheim since 1997. He has been a member of the German Council of Economic Experts since 2003 and its chairman since 2009.