Why Germany Dominates the U.S. in Innovation

http://blogs.hbr.org/2014/05/why-germany-dominates-the-u-s-in-innovation/

by r0h1n • 12 years ago

142 127 12 years ago

blogs.hbr.org

mschuster913• 12 years ago

One thing that the US definitely are better at than Germany is accepting failure.

Failure in the US is expected in the startup world, whereas you'll often not even get a fucking cellphone contract once you went broke in Germany. For years.

jwr• 12 years ago

That is true not only of Germany, but of many (most?) European countries. In Poland, if your company goes bankrupt, the social stigma will be with you for years.

_delirium• 12 years ago

In Denmark it depends on the legal structure of your business. Personal debts are much harder to discharge in bankruptcy than in the U.S., and cause much longer-lasting trouble. But it's fairly easy to set up a limited-liability company, and in that case your personal finances are insulated from what happens to the business, like in the U.S. For example if an ApS you were owner of went bankrupt, it wouldn't impact your personal credit, and you wouldn't be personally responsible for the debt. As a result it's quite common for even low-turnover one-person freelance businesses to be incorporated as an ApS rather than performed as a sole proprietor (roughly like the use of LLCs in the United States).

pawelkomarnicki• 12 years ago

That's only partially true about Poland. Your bankrupt company brings stigma only in case you performed some shady stuff, e.g. cheated on taxes or treated workers bad. From my experience I know that it's super hard to do business in Poland, because of specific mindset of my fellow Poles. Trying to make a startup and failing won't actually leave you with stigma.

dba7dba3• 12 years ago

Same in Asian countries like Japan and Korea and China. I think pretty much US is the only place where FAILURE IS AN OPTION.

x3ro• 12 years ago

My impression on the U.S. startup world has been "either you go (very) big or you die/fail". In Germany, in contrast, it is perfectly fine for a startup to earn a million or less a year, and never even aspire to earn billions, as long as it pays the bills and you employ some people. Thus I conclude that it is "harder" to fail if your expectations are not unrealistically high. Also, as Tomte has pointed out, company bankruptcy does not equal personal bankruptcy.

On the other hand, I only know the U.S. startup world from what I've read, so I might be totally off there. So please correct me if I'm wrong.

dragonwriter2• 12 years ago

I think "startup" may be being used differently in those two context. Its fine in the US for a small business to not seek explosive growth and to have a steady, reasonable income and employ some people -- but that's not usually called a "startup" (around here, the term "lifestyle business" gets thrown around sometimes.)

"Startup" is generally used for something that is (or seeks to be) VC funded based on a vision of investors realizing immense gains in an eventual acquisition or IPO.

It sounds like its quite likely what you are calling "startup" in Germany and what is called "startup" in some US-centric contexts (like HN) are not really the same category, and that the former is broader than the latter more than what is acceptable in Germany being different.

dragontamer• 12 years ago

West Coast startups tend to have this "Big or Bust" mindset. East Coast startups can be content to grow more organically.

Its New York financing vs Silicon Valley financing. Remember that Hacker News is based on YCombinator: a West Coast incubator.

You'll probably never hear about the tons of small scale restaurants, small government contractors (I've seen teams of 10 or less), and one-off donut shops. But they're relatively common in the East Coast. There's a "MicroBrew Beer" restaurant every block in some areas.

Its a bit different on the East Coast. There are tons of business owners that I know of, but all of them are quite small businesses. My High School math teacher owned a franchise restaurant, another high school teacher owned a potato chip company, my cousin owns a Pho shop, my uncle owns a private Sports-Medicine practice (finances are run by his wife). A lot of blue collar work (like HVAC, Roof Repair, and other household tasks) are done by contractors or small businesses.

None of these businesses plan to strike it big. Its more about day-to-day operations and basic work.

Naturally, you'll see more "Big or Bust" methodologies around YCombinator. The small organic growth of the East Coast startups don't really make news and are frankly... very mundane and boring.

moonlighter2• 12 years ago

"it is perfectly fine for a startup to earn a million or less a year, and never even aspire to earn billions, as long as it pays the bills". That's basically the concept of Micropreneurs and Solopreneurs here; also not to take VC funding (at least not until much later) and instead either bootstrap or crowd-fund. It's not as glamorous or much talked about as the Silicon Valley startup scene, but it definitely exists here, too. For example, http://imgur.com started out that way: http://thisweekinstartups.com/imgur-alan-schaaf-andreessen-h...

pearkes3• 12 years ago

There's a specific term for those compartively small but succesful businesses in Germany. "Mittelstand".

It's cited as being a huge source of strength for the German economy, seems to be similar to what Americans might call a "lifestyle" business. You see lifestyle businesses portrayed as "settling for less" in American media, whereas Mittelstand has a very positive connotation in Germany.

http://en.wikipedia.org/wiki/Mittelstand

Tomte• 12 years ago

Maybe if you personally go bankrupt. If your startup company goes bankrupt, I highly doubt it.

mschuster913• 12 years ago

The point is how you incorporate your startup. If you do it as Einzelunternehmer/GbR to avoid having to raise 25k € just for providing the base capital, then you're fully liable for anything that happens with your personal assets.

Now you have e.g. a data breach, or your entire inventory goes down in a flood/fire/accident and you're not properly insured (most private insurances will not cover your business assets, even if your business is in your home), you're out of luck.

And as we're speaking of capital: in the Valley, you basically have to have a good business plan, a sales pitch and a bit of luck and you'll be bathed in cash (at least, this is my impression of reading here). In Germany, no luck obtaining a larger credit or startup financing as long as you don't put up your house or car as collateral.

novalis78• 12 years ago

This is quite an important point. As a German-expat in the US I marvel at the flexibility and "let's just do it and see what will happen" mentality that welcomes risk and embraces failure in the pursuit of some wild idea. In most cases these ideas turn out to be fruitless but sometimes - against all odds - they lead to amazing results.

emsy• 12 years ago

Failure with a startup and going broke are two different things. And I'd argue that the consequences of being broke are worse in the US than in Germany.

Failure is not so much of an economical than a social problem in Germany. If you fail only once, you will always be the guy/girl with the idiotic idea that didn't work out. Of course, anybody could've told you that! If you succeed you will face a lot of jealousy. This leads to a culture where following your dream will earn you so much negative reactions that it's really hard to sustain.

progx• 12 years ago

Ah ok, they only talk about our Car Industry, as always.

I don't see any other business that has "experimental software engineering" in germany. And yes we have some lighthouses, like every other country too.

tinkerdol3• 12 years ago

My work in Geoinformatics could also be called "experimental software engineering".... I work out of a University of Applied Sciences near Frankfurt. Not connected to the car industry. I think the article was spot on in identifying the huge investment that goes into research in the country, although they might have strangely overemphasized the Fraunhofers (while forgetting institutions linked to Leibniz or the DLR/ESA or just the massive employment through universities such as mine...)

this_user• 12 years ago

What they don't mention is the fact that there is no German IT company of international importance. The only exception is SAP and they were founded in 1972 and IMO have a good chance of being disrupted in the near future if they don't start innovating soon. There may be some promising startups that have appeared over the last couple of years, but there is no Microsoft, Apple, Google, Facebook or anything even remotely like it.

lispm4• 12 years ago

That does not mean that there isn't lot of software being developed, just that you focus on 'international importance'. A lot of software development goes on for industries you typically don't see much of.

derwildemomo• 12 years ago

Spot on. I'm working and living in germany, and this is one of the biggest problems, in my opinion, for the future of this country. You rarely find some startup here that is truly innovative – the fews that are usually don't get funding. It's a dead end, and I don't see it changing.

_glass• 12 years ago

There is also the Software AG (Revenue: €1.120 billion (2010)) … From my experience the software is very much swallowed up by SAP and the culture of hiring for the rest consulting companies which markets customizing for additional software. So the interruption will most likely not take place. This process is facilitated because of manufacturing being so much big business. It is very hard to interrupt in B2B. And the service-driven American economy is in a huge advantage because of a culturally similar testing ground and much more ability to invest here. Then you can just export.

revelation• 12 years ago

There was this Siemens ad recently: https://www.youtube.com/watch?v=y49KJKXI5Mg

The point isn't so much that there are German IT companies, the point is that pretty much every company nowadays is an IT company.

elchief• 12 years ago

Well, RapidMiner is the number one data mining tool. And it started near Cologne.

rurban• 12 years ago

Nonsense. In industrial applications there's mostly german SW controlling the world market. They don't care that you never heard about it.

stannol• 12 years ago

Not true at all. There are not many high profile IT companies in Germany, true. But there are countless companies that produce A TON of software (Daimler, Siemens, Bosch, ThyssenKrupp, Continental, Schaeffler, Infineon, EADS, Rohde+Schwarz to name only a few). This software is crucial to industries all around the world, it just isn't visible like things coming from Microsoft et al.

bluetomcat3• 12 years ago

The US concentrates way too much on the consumer side of innovation, whereas Germany seeks to improve and optimize the whole cycle of its manufacturing, without necessarily aiming to put something on the shelves immediately. This makes Germany a much more predictable and less volatile economy.

ganeumann• 12 years ago

Source?

You may just see the consumer innovation and not the industrial innovation. I invest primarily in B2B companies, and I think the US innovates more in this sector than any other country.

If you're just thinking of incremental/internal innovation, then Germany may or may not be better than the US, but there's no widely accepted way of measuring this so any opinion is purely anecdotal.

adventured3• 12 years ago

I'm always amazed at how little understanding there seems to be about the vast nature of American manufacturing (nearly $2.5 trillion in size, it's larger than the entire UK economy by itself). Its death has been greatly exaggerated. What has happened, is due to massive gains in productivity the labor force has been reduced heavily. More manufacturing jobs have been lost to productivity gains than to China, seemingly a little known fact.

danielweber5• 12 years ago

Why would "seeks to improve and optimize the whole cycle of its manufacturing" correspond to "more predictable economy"? Wouldn't "improving and optimizing the whole of manufacturing" cause even more disruptions?

(I'm not arguing against creative disruption. I'm wondering how to square the two concepts.)

bluetomcat3• 12 years ago

Because, at the end, all that brings gradually better products of real value, instead of just trying out completely different ideas which are destined to be the "next big thing" in a chaotic manner, which is what happens to a large extent in the US.

sfbsfbsfb• 12 years ago

I'm willing to be convinced that Germany dominates in innovation but that would require a definition of 'innovation' and some data. Until then, count me skeptical.

calibraxis• 12 years ago

I'm fine accepting the article's conclusion, but I missed the reference to the "repeated studies" it mentions. Anyone know which these are? (Is it in the links to places like asme.org?)

adventured3• 12 years ago

I read that article three times to make sure I wasn't missing some strong supporting evidence. I didn't see any supporting evidence anywhere. What did I miss? The only thing I ran across were very brief opinions stated as facts, and they seemed pretty outlandish, given the facts about the US economy that are easily brought forth, like for example that the US is the world's most productive manufacturer (how can that be true if German manufacturing is so superior per the article?):

http://www.nam.org/Statistics-And-Data/Facts-About-Manufactu...

300bps• 12 years ago

Why Germany Dominates the U.S. in Innovation

√ Linkbait headline

Reading the headlines, you might think that the most urgent question about national success in innovation and growth is whether the U.S. or China should get the gold medal.

√ Strawman argument

True, Americans do well at inventing. The U.S. has the world’s most sophisticated system of financing radical ideas, and the results have been impressive, from Google to Facebook to Twitter.

√ Content that contradicts linkbait headline

Americans need to recognize that the purpose of innovation isn’t to produce wildly popular internet services. It’s to sustain productivity and employment growth in order to ensure real income expansion.

√ Political agenda exposed by end of article

fjk• 12 years ago

The article discusses how Germany's middle class manufacturing jobs are booming while the United States is seeing a major decline in that demographic.

There's a comment after the article by 'LaughingTarget' that touches on a lot of great points but I wanted to bring up this specifically:

For example, if an accountant is hired at BMW is classified as a manufacturing employee while an accountant in an accounting firm supporting Tesla Motors is classified as a service employee.

Classification of jobs matters, and the article's analysis of manufacturing jobs between Germany and the US seems like an apples to oranges comparison.

Zigurd3• 12 years ago

Classification of products also matters. That bump in durable goods manufacturing? That was an order for 10 submarines. Our manufacturing is highly dependent on military spending. That's not enhancing the quality of life here.

njharman• 12 years ago

That's not enhancing the quality of life here.

Well that's unknowable. Based on the perceived quality of life of people the USA bombs/embargoes/invades, it's better to be the giver than receiver.

spindritf• 12 years ago

I don't buy the premise. Anyone knows what are those "repeated studies" he doesn't cite? I can't really even imagine measuring some sort of nation-wide innovativeness.

High employment in manufacturing doesn't seem like any proof of innovation to me. OK, so they make their own stuff and Americans outsource to China. Maybe that's a smarter way to go. But it has little to do with actually inventing and developing a product.

Spearchucker• 12 years ago

That's fair enough. An explanation of the widening income gap in the US (as opposed to non-widening income inequality in Germany) would be interesting.

radva422• 12 years ago

There are a lot of studies that measure not only the nation wide capacity to innovate, but all sorts of factors - political stability, business sophistications, etc. For example check the GCI: http://www3.weforum.org/docs/WEF_GlobalCompetitivenessReport...

This report covers the entire globe.

I'm not german, but I have lived around 8 years in Germany, I studied at a technical university there and worked at one of the Fraunhofer Institutes, which are mentioned in the article I have to say - they are definitely doing it right. I mean... just comparing how affordable universities are there. I am always amazed when I read stories about students in the US who graduate with $50.000 or more in debt. What I paid in Germany was around $300 per semester (for which I received also a travelling ticket for the entire transport system in the entire province... just the value of this ticket exceeds the $300) and that was about it. Later they introduced semester fees and I had to pay around 700$ per semester. And that was really high. I mean ... people were protesting and the province's government removed the fees. And it's really easy to find a part-time job in your field of studies in a high-tech cluster. In the case of my university the government spent like 2.5$ billion to extend the existing high-tech cluster so it can acommodate another 10.000 highly skilled researchers. This is all happeneing in a small city with 250k people. In areas like Stuttgart and Muenchen it's even crazier what they are doing.

The only thing I am not fond about Germany right now is the high taxes. But AFAIK the government are planning in reducing the tax burden on companies to keep the economy competative.

I don't know... is it easy to find a part time job in your field of studies in the US?

rco87862• 12 years ago

What does the cost of education have anything to do with here?

What I paid in Germany was around $300 per semester
In the case of my university the government spent like 2.5$ billion to extend the existing high-tech cluster
The only thing I am not fond about Germany right now is the high taxes

Ever think those might be related?

I don't know... is it easy to find a part time job in your field of studies in the US?

In the U.S., like the rest of the world, this is entirely dependent on what your field of study is.

mastazi• 12 years ago

I'm sorry, I don't buy it. No data, no sources to support the claims about innovations, and the analysis is largely limited to one single industry. I'm not convinced by this article and my personal experience - I'm European and I have been to Germany many times - tells me that there are many other factors, besides innovation, to justify the good performance of the German manufacturing sector.

alexvr• 12 years ago

I almost had to stop reading after this sentence:

"The U.S. has the world’s most sophisticated system of financing radical ideas, and the results have been impressive, from Google to Facebook to Twitter."

Not one of these began as a "radical" idea. I have a ton of respect for Google, as it certainly does some radical things today, but it started out as just a better search engine. And Facebook is hardly even an idea. Don't even get me started on Twitter. They certainly provide lots of value, but the initial concepts are not radical whatsoever.

Concepts/companies like solar roadways, Tesla, and SpaceX blow Facebook, Twitter, and even Google out of the water in terms of radicalness.

josefresco3• 12 years ago

At least "solar roadways" has a clear purpose/need. Twitter and Facebook were/are almost completely frivolous, and only because of success have they become part of the business fabric in the US and around the world. The idea what these two services succeeded and are so "valuable" is indeed pretty radical.

adventured3• 12 years ago

Your profile lists an icq #, an email address, and a twitter handle....

You don't think there's value to networking social connections together online for ease of communication and media sharing? How else would all the things these networks do, be performed in an efficient manner?

There's no value to KiK, WhatsApp, instant messaging, email etc? Because all Facebook is primarily, is a communication platform, whether you're sharing text or images or video.

I think you've got it dramatically wrong. These things are worth a trillion dollars, and the value has been proven true across every culture on earth.

danielweber5• 12 years ago

Even if Facebook and Twitter are a waste of time (you could probably convince me of this, in fact), saying how the US does them well is called "damning with faint praise."

The US invents other things besides Twitter and Facebook.

jqm• 12 years ago

Yes, that sentence got me as well.

It's not that Twitter and Facebook aren't important (they aren't to me but that's irrelevant), it's that there are other arguably more important and very importantly (in this context), different, innovations from the US.

When a person is saying "radical ideas...from...idea1, idea2, etc." one expects a continuum or line of DIFFERENT ideas. Not two ideas that are pretty similar and three in the same industry. The "From" scale is way too short for the article's concept. It's like saying "Radical clothing designs from jeans with no pockets to jeans with stonewashed fading and jeans which are dyed green".

End nitpick.

josefresco3• 12 years ago

"In the U.S., by contrast, fewer and fewer people are employed in middle-class manufacturing jobs"

Isn't this kind of on purpose? I get how we're now bemoaning the loss of manufacturing in the US, but before times "got hard" the shift to a services based economy was seen as a good thing. Or at least a good thing as long as the economy was/is healthy.

One could argue that it isn't, and that the loss of manufacturing caused the US economic problems but that's another discussion entirely.

The article seems like it's conclusions are based on job classifications between two countries that don't tell the entire story.

pessimizer3• 12 years ago

before times "got hard" the shift to a services based economy was seen as a good thing.

More sold as a good thing. The same media outlets that were pushing the 'transition' into services were part of larger conglomerates that stood to benefit from overseas manufacturing.

drzaiusapelord2• 12 years ago

I'd rather have a low level white-collar job than a blue collar one. Running a lathe or changing 200 degree oil in a robotic arm kinda suck compared to rebooting servers or being a powerpoint jockey. Arguably, the white collar job has a career path. Being a lathe guy means staying a lathe guy until your overseas competitors start moving in products at half your cost. Now you're an unemployed lathe guy. Might as well beat them to the punch, move manufacturing overseas, make cheaper things, and get out of the 100 degree factory floor. Now you're both selling $5 stair balusters but yours has better marketing and design on the box and you can interact with buyers in person easily.

xyzzy123• 12 years ago

Or a telephone sanitizer.

netcan6• 12 years ago

I would much rather be a welder or even a line worker in a factory than a call centre employee, personally. Though, I'd certainly take living in this decade to living in previous decades.

I do think something has been lost though. In a healthy manufacturing area of generations past someone who was 'hardworking and reliable' could get a 'decent' job. The financial rewards, self esteem and such from these jobs were deemed adequate by the people of the times. Get over the hurdle and you can be fine. Today, 'hardworking and reliable' is not really sufficient. Those cookie cutter jobs don't exist. I think politicians are at a loss because it just isn't clear what a person needs to do to qualify them for employment in this world.

Some new jobs are highly specialised, like programming. These are hard to get people in to, but at least it sounds possible to train people for them. But, how the hell do you qualify people people who are 32 and have been unemployed for the past 3 years to be social media analysts?

wutbrodo• 12 years ago

One could argue that it isn't, and that the loss of manufacturing caused the US economic problems

I've heard a lot of references to how we need to bring manufacturing back, but what's the TL;DR on why they're so necessary? Is it just that they're stable blue-collar jobs? My understanding has been that the issue was that blue-collar jobs aren't economical any more (when competing with automation and workers in poorer countries), but that we failed to educate our population enough that they could fill white-collar jobs. Aside from the national security argument (domestic manufacturing and energy production per se have those advantages), is there something I'm missing about the benefits of manufacturing jobs?

drcode• 12 years ago

This article does not site any statistic as evidence to show Germany is more innovative than the US. (You'd be excused for missing this, since they site lots of other irrelevant statistics that have no bearing on their thesis.)

netcan6• 12 years ago

What nonsense.

'Germany innovates in order to empower workers and improve their productivity; the U.S. focuses on technologies that reduce or eliminate the need to hire those pesky wage-seeking human beings.'

First, hogwash. Second this whole article is an attempt to pick a bit of this and that and get to a conclusion, like some high school debate club.

Germany's manufacturing sector is more innovative than the US' at the moment. This has all sorts of reasons. They’re good at industrial engineering. The US’ software industry is by far the most innovative in the world, especially consumer facing software. Israel has a strong generic drugs industry and South Korea are great at consumer electronics.

Different countries are different and if you want to draw a narrative explaining why, you’ll need to set a higher bar than this.

These things are not some inevitable outcome of a policy. They are organic developments that happened. They have a history. They’re caused by culture, and luck and magic as much as and more than they are caused by the “three factors” that he lays out.

tinkerdol3• 12 years ago

They’re caused by culture, and luck and magic as much as and more than they are caused by the “three factors”

Germans don't believe in luck and magic, maybe that's why they make great industrial engineers :) Although you're right that it's surely a complex process. We'll have to wait and see how much and which investments really pay off, but in the meantime it is nice to live in an environment where billions are invested (check out http://ec.europa.eu/programmes/horizon2020/ to read details about a new European wide program).

fennecfoxen• 12 years ago

It bothers me a bit when people (politicians, supporters, big business guys) throw around big numbers about how much has been Invested in something. Investing billions is easy. Getting billions in return from your investment, now, that's quite a bit harder. Investing less money for the same return, also hard.

Anyway, these billions should be counted on the negative side of things, is the point. Tell me instead of the return on your investment!

jboy552• 12 years ago

Horizon 2020 is giving out 80 billion Euros between 2014 and 2020. That's a big amount roughly $15 billion per year. In the US, private venture capital being invested is around $4 billion, per month, or $48 billion per year.

Plus, there's the baggage of accepting public money. In private money, your failures are fairly private. Its not front page news when Kleiner Perkins put $30 million into a failure. But Solyndra failing was a huge deal in the US. In Canada, where I grew up, public money going into failures is always newsworthy.

When 50 million Euros of that 80 billion goes to some fraudster, it'll put the whole program at risk. That's why its difficult for countries to legislate innovation. There's a large party of people who are rewarded when those investments fail.

pessimizer3• 12 years ago

They’re caused by culture, and luck and magic

Is this an example of the non-'hogwash' way of reasoning about reality?

netcan6• 12 years ago

What I mean is that the industries which prevail in a country are there because of a combination of many reasons. Most of them are historical and many/most of them unknown or at least poorly understood. Industries are ecosystems and they are culture. Policies play a role, but its a complicated role, interacting with all these things.

I'm objecting to this article on two levels. One, that it is at all possible to pick a result (even if it was defined) like innovation in manufacturing and relate it back to policies which can be then implemented somewhere else to achieve the same result. Policy isn't the only thing at play and

IE, if the US would understand like Germany understands that "innovation must result in productivity gains that are widespread, rather than concentrated in the high-tech sector of the moment." then GM would have good software like BMW does.

Second, I don't think the author even tries. WTF is he even saying. Who is Germany? What exactly does she understand? Does "understand" mean implement a policy? What policy? Are we talking about changing high school curriculum or tax codes? He's basically isn't saying anything while trying to give his audience the impression that some very obvious mistakes are being made needlessly.

The conclusions are populist and political, nearly implying a belligerent conspiracy.

"Germany’s innovations create and sustain good jobs across the spectrum of workers’ educational attainment; American innovation, at best, creates jobs at Amazon’s fulfillment centers and in Apple stores."

And it's mostly untrue, to the extent that weasely implications and unspecific statements can be true or untrue. The bones of his non-argument seems to be that German innovation creates good middle class manufacturing jobs while US innovation eliminates them. That's not true.

Amazon & Apple do not employ only low wage staff. They have nothing to do with displacing auto workers. They employ mostly people in "middle class" jobs. The German manufacturing sector isn't increasing employment in good old 1950s style manufacturing jobs either. They sector is employing engineers, accountants and such, just like Apple and Amazon.

I don't literally mean magic.

vasilipupkin• 12 years ago

the strength and certainty with which you dismiss the article are not supporting by your arguments. Germany has certain institutions in place to support certain types of innovation. Whether or not US can reach the exact same level in those areas is besides the point - the point is to try to replicate those institutions that are working to improve things here

mattlutze• 12 years ago

The author's position as a chair of innovation studies at the University of Toronto surprises me, given the very Op-Ed'dness of this blog post. I'd expect a professor talking about his field to be able to easily cite the studies and statistics informing his opinion.

danielweber5• 12 years ago

And it repeats this trope about the US manufacturing industry being "decimated." The US is manufacturing more stuff than ever before.

His evidence is that US manufacturing is only 13% of GDP, where it is 21% of GDP in Germany.

Well, percent-of-GDP is, by definition, a zero-sum game. There are only 100 percentage points to go around. What other industry has been "decimated" in Germany by those 8 percentage points going into manufacturing?

This is HBR's "blog network." Can any Harvard Business student make an equivalent entry, or is there some kind of editorial control here?

netcan6• 12 years ago

Dan Breznitz holds the Munk Chair of Innovation Studies and is a codirector of the Innovation Policy Lab at the Munk School of Global Affairs at the University of Toronto.

That's why this soft headedness is infuriating.

darkmighty2• 12 years ago

You're picking a strange point. Relative decline, in %GDP, does mean a decline in importance in manufacturing. It's well known that US manufacturing is down for the last few decades and Germany is indeed an outlier among western countries in that manufacturing has retained relative economical importance.

bayesianhorse4• 12 years ago

"Culture" is also a very common way to explain random effects with something you can be proud of.

dba7dba3• 12 years ago

South Korea are great at consumer electronics

South Korea is also strong in shipbuilding. I think about nearly half of the ships being built these days are from South Korea. And these are not just simple container carriers. Lots of LNG carriers and also a few billion dollar LNG floating plants that are being built by Samsung Shipyard.

And Hyundai is also 4th largest car manufacturer as of 2012, ahead of Ford, Nissan, Honda.

Oh btw, I don't see any German corporation in top 30 US Patent Assignees. Top 20 are dominated by US, Japan, Korea, and Taiwan. Highest ranked German firm is Siemens at #33.

I agree the article is standing on weak reasonings.

bane• 12 years ago

It's probably still true, but the #1 and #2 largest shipyards in the world are right down the road from each other on the Koje-Do island - Samsung and Daewoo within just a few ships from each other in terms of overall size.

There are 3 very large shipbuilders in South Korea as it turns out.

I got a chance to get a tour of the Daewoo Shipyard back about 6 years ago now. And they had all manner of ships under construction, including ships as advanced as submarines -- all for external countries. The submarines were all for Germany IIR. It was very impressive.

levosmetalo2• 12 years ago

It's funny how patents are now used as an indicator of innovation here, while seemingly vocal majority here on HN would happily dismiss complete patent system as meaningless and and because it suppress innovation.

That being said, why would German companies rush to register their patents in US patent office? What is the ranking of US companies registering patents in Germany?

marknutter5• 12 years ago

Because Germany boldly pushed forward to innovate a commercially viable electric car oh wait never mind..

arethuza3• 12 years ago

I'm not disagreeing that the article is a bit silly, but electric cars aren't the best thing to pick:

http://www.bmw.co.uk/en_GB/new-vehicles/bmw-i/i3/2013/start....

NB The i3 has been getting great reviews and is only £25K or so in the UK after the £5K you get back from HMG.

Edit: I just checked and a base Tesla Model S is £50K after the same rebate - so I don't think they are competing.

marknutter5• 12 years ago

Does the Tesla not pre-date the I3?

lispm4• 12 years ago

Like a mass market BMW i3 with carbon technology? The i8 sports car.

The company I work for is involved in a tiny part of the software for it.

arethuza3• 12 years ago

I hope you got a test drive - the i8 is a gorgeous car!

marknutter5• 12 years ago

"Why articles that start with 'Why' are not worth reading"

lispm4• 12 years ago

This chart may explain what the author thinks of:

http://www.finfacts.ie/irishfinancenews/article_1025980.shtm...

See the number of 'hidden champions' in Germany, a country with 1/4 the US population.

morgante2• 12 years ago

To be honest, I don't see why having "hidden champions" is a desirable thing. The criteria:

1. is among the top three in its global market or is number 1 on its continent

2. has less than $5bn in revenue

3. and is little known to the general public.

I'm certain the US has a plethora of companies which meet the first criterion, but we (rightfully) fail on the second and third. What is advantageous about a business culture where successful companies languish in relative unprofitability and/or obscurity?

lispm4• 12 years ago

You get family owned companies in tiny rural German towns who stay there for hundreds of years and make hundreds of millions in revenue. They provide stable employment, excellent jobs, excellent education, ...

A newer example is Herrenknecht. In the town of Schwanau - population 6807. Herrenknecht made a little over one billion Euro in revenue in 2012.

Their business: huge tunnel boring machines.

http://www.newyorker.com/reporting/2008/09/15/080915fa_fact_...

A list of their projects:

http://www.soic.de/tunnelbohrmaschinen_herrenknecht.php

Herrenknecht at work in New York:

http://www.tunneltalk.com/East-Side-Access-Mar11-Queens-TBM-...

I find this pretty exciting.

danvoell• 12 years ago

IMO The reason fewer and fewer people are employed in middle-class manufacturing jobs is because of innovation. The automation (innovation) in today's machinery means that manufacturers mostly need people with little technical knowledge to push buttons and grab parts for $10 an hour. They don't need as many technical machinists and machine operators who got middle class salaries. Some of these middle-class jobs are overseas but for the most part they are just gone.

umrashrf• 12 years ago

Because there's no tuition fees; period. US schools are just mere businesses.

Im_Talking2• 12 years ago

Because Germans are not as religious as Americans.

bayesianhorse4• 12 years ago

I don't agree necessarily both on religiosity and on that being a cause for performance or innovation. I'll grant you that in the U.S. there are a lot more arguments about religion and it is tighter bound to politics. You will find masses of devout Christians all over Germany, but they usually don't go out bullying school administrations into some bs about creationism.

Im_Talking2• 12 years ago

The more the people's lives are dominated by the religious, the less innovation there is. We only need to look at the Islamic countries to see evidence of this.

guard-of-terra• 12 years ago

Are Fraunhofer Society the same guys who terrorized the whole open source community for the most part of 00s with the ill-written MP3 license?

Maybe they understand innovation but no kudos to them for that.

Eye_of_Mordor• 12 years ago

Google/Facebook/Twitter - yeah that took years of scientific study and research. Weren't they all started by 2 people with a great idea?

Truth is, US 'innovation' is all about ideas, whereas a high level of collaborative intelligence is used in Germany.

morgante2• 12 years ago

Americans need to recognize that the purpose of innovation is ... to sustain productivity and employment growth in order to ensure real income expansion.

That's a highly dubious criterion, one which Germany's inelastic labor market certainly has an advantage in. Since strong unions make it much harder to lay off employees in Germany, German manufacturers have substantially less incentive to invest in labor-saving innovation. Their American counterparts do, which contributes to our GDP continuing to grow steadily. Also, US manufacturing is certainly bigger than Germany's—it's just taken as a percentage out of a bigger whole: the US GDP per capita is nearly $10k higher than Germany's. [1]

For the rest of us, it's well-accepted that one of the key drivers and outcomes of innovation is to increase output without increasing factors of production, including labor. Put simply, a more innovative society is almost certainly one that's losing jobs (particularly jobs in traditional sectors). Keynes, a favorite of socialists and liberals, absolutely acknowledged that the expected outcome of technical innovation is less and less work. [2] Though we've continued to invent new jobs for people displaced by disruption ("social media manager"), it's completely expected that employment is lagging in traditional sectors like manufacturing.

By reasonable criteria, the US dominates Germany in innovation. We innovate people out of jobs.

1: http://en.wikipedia.org/wiki/List_of_countries_by_GDP_(PPP)_... 2: http://www.marxists.org/reference/subject/economics/keynes/1...

jey• 12 years ago

Possible interpretation: Germans engineer, but Americans invent.

I imagine the most successful German companies are more like GE and IBM and not like Google, Apple, or Uber.

squozzer• 12 years ago

I wouldn't wind myself up too hard about something in HBR. HBR's editorial policy seems to boil down to the following: 1) If America sucks at something, it's because Americans are dolts and/or the US government is run by incompetents. 2) If American is good at something, it's because American businessmen are geniuses whose excrement tastes like truffles. It's possible that both 1 and 2 are true for a given piece one might find on HBR, but their pattern suggests propaganda, and we already have Fox News, thankyouverymuch.

tsotha• 12 years ago

Nobody's ever come up with a reasonable way to measure "innovation", so right off the bat you know this article is built on a shaky premise.

As to manufacturing, sure, the German manufacturing sector is larger as a percentage of GDP, but you'd expect that, as the German government subsidizes manufacturing to a greater extent that the US (particularly in the area of training).

Why Germany Dominates the U.S. in Innovation

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