What do you mean by entrepreneurship and innovation

Entrepreneurship

Nancy Richter

To person

Dr. rer. pol., born 1981; Organizational and management researcher; Head of Innovation and Entrepreneurship at the Alexander von Humboldt Institute for Internet and Society (HIIG), Französische Straße 9, 10117 Berlin. [email protected]

Thomas Schildhauer

To person

Dr. Ing., Dr. oec., born 1959; Holder of the university professorship in Marketing with a focus on Electronic Business at the University of the Arts, Berlin; Director of the Institute of Electronic Business e.V. (IEB) Berlin; Director of the HIIG (see above). [email protected]

Germany is one of the most innovative countries in the world, but does rather poorly in the area of ​​business start-ups. [1] The innovative strength of an economy is usually measured by the ability to translate material and immaterial innovation resources into innovative goods, services, technologies or business processes or models. Intangible innovation resources include, for example, training and further education in schools and universities or research and development in companies. Material innovation resources can be found in the infrastructure, such as information and communication technologies, logistics, availability of financing through venture capital (VC) or loans, the extent of the tax burden, but also protection for investors. In addition, networks between research and industry are important, but also institutional framework conditions such as the political stability of a country, the laws and regulations and their enforcement as well as the general business environment.

The innovative strength or the innovation output of a country is measured, among other things, by the number of registered patents, scientific and citable articles, competitive technologies and their export, cultural and creative products and services and the number of business start-ups.

In a comparison with 141 countries worldwide, Germany ranked twelfth in 2015 in the Global Innovation Index (GII), an internationally renowned innovation report. [2] In 2013 it was ranked 14th and in 2014 it was ranked 13th. The country is particularly good in terms of innovation output, where it ranks eighth. Among other things, this concerns the number of registered patents and production in the field of high technologies.

In contrast, the situation in the area of ​​start-ups has deteriorated. According to the GII, Germany was only 52nd in the start-up rate in 2014 and rose to 59th place in 2015. The framework conditions for business start-ups as an important innovation resource are also problematic. While Germany still ranked 76th in 2014, it slipped to 93rd in 2015. This result is also supported by the Global Entrepreneurship Monitor (GEM). Germany is below the GEM average in the area of ​​framework conditions, particularly in the training and further education of entrepreneurs, in value systems and in internal market dynamics. [3]

For a country that is one of the highest income and most innovative in the world, this is an astonishingly poor result. The reasons for this are varied and cannot only be derived from numerical comparisons of innovation resources. Above all, the interactions between the innovation factors and their implementation by the actors involved from politics, companies and regulatory systems must also be taken into account. Cultural aspects such as the spread of entrepreneurial thinking and action as well as the willingness to take risks and dealing with initially failed entrepreneurs in a society are also important. According to GEM, Germany ranks 41st in the field of entrepreneurship-related cultural and social norms compared to 61 other countries worldwide. It is thus far behind other innovation-based economies such as Israel (1st place), the USA (2nd place), Canada (rank 4) and Switzerland (6th place). For example, Belgium (43rd place), Japan (50th place) and Greece (55th place) are just as weak as Germany.

However, it is not only weaknesses such as administrative barriers, a relatively weak entrepreneurial and risk culture, an insufficiently developed offer of start-up apprenticeships at schools and universities and a lack of well-trained workers that have an impact on the low start-up performance, but also Germany's strengths.

Because both the existing prosperity and the high innovative strength hinder the implementation of new ideas. This sounds paradoxical at first. But you have to know that the German innovation mentality tends to support incremental growth and thus the improvement of existing products, services, processes and business models. [4] After all, it is these values ​​that make Germany an industrial one powerhouse have made. As the data from the innovation reports show, it is very well positioned here. Incremental innovation requires investments, the use and results of which are relatively easy to plan. The risk is therefore relatively low.

It is difficult to deviate from such a practiced behavior pattern. In addition, there is an aging society and thus a sufficient number of jobs for those able to work, as well as security and recognition in established employment structures. Even the excellent dual training system in Germany leads young graduates to take up jobs in established companies and industries rather than to the decision to start their own company.

It is important for politics and society to understand these interactions if they want to support the establishment of companies in Germany. The current developments in the area of ​​incremental innovation are good, but in order to remain economically successful in the future, other ideas are needed that are implemented by new market players in entrepreneurial models. In any case, considering the current demographic situation and increasing international competition with ever shorter product life cycles, the forecast for future prosperity and sustainable competitiveness is rather negative. [5]

Germany must therefore not rest on existing prosperity, but is dependent on the implementation of radical innovations by new market players, in particular by innovative founders and so-called start-ups, in addition to a permanent incremental improvement of products, services and processes.