Brain gains, but lagging on new tech: Germany’s research and innovation assessed

Germany has managed to become a net importer of scientists, but still lags on innovation measures for several key technologies like gene editing of crops and artificial intelligence an annual report into the country’s research system concluded last week.

Each year, a brain trust hands the German chancellor a weighty report, detailing the country’s successes and failures in research and innovation, and a series of candid recommendations for the future.

This year, the Expert Commission for Research and Innovation passed chancellor Olaf Scholz its assessment at a particularly crucial time, with the Germany economy faltering and Brussels policymakers demanding more defence technology investment in the face of the threat from Russia.

Despite this gloom, the report highlights one big, long-term positive trend, following years of steady budget increases for research under the previous government of Angela Merkel.

Germany has managed to reverse its long-standing brain drain of the 2000s and early 2010s, and is now attracting more researchers than it is losing. “Germany is therefore on a favourable trajectory,” the report says.

But this brain gain is not equally distributed. Germany still loses many more researchers than it gains to the US, Switzerland and the UK. Its net inflow is driven by immigration of academics from Italy, Spain, China, Russia and India.

The picture is less rosy when looking at inventors, defined as those filing patents. Germany has consistently been a net loser here, although in 2020 managed for the first time to attract more than it lost. “The net outflow of inventors from Germany has decreased since 2014,” says the report.

The report also zooms in on new, sustainable agricultural technologies, and in particular, innovation in gene-edited crops.

Here, the EU’s scientific base is reasonably strong: it produces as many papers about using CRISPR gene editing on agricultural crops as the US, although China is still in the lead.  

However, when it comes to filing patent families in this area, China dominates, the US is second and Germany and the EU “lag far behind,” the report warns.

Currently, growing genetically engineered crops in the EU is all but prohibited, although the Commission has put forward plans to loosen regulations. Berlin should support this proposal, the report says.

The report also confirms just how far Germany, and indeed the whole EU, lags when it comes to private money invested in AI. In the last three years, Germany attracted considerably less money than the UK to its AI firms. Meanwhile, the EU lags China and particularly the US, which has seen a huge glut of money pour into the sector.

As of 2022, the US has produced more than half of existing large language and multimodal AI models. The UK was the origin of 21.9%, China 8%, Canada 6.3%, Israel 5.8%, and Germany just 3.1%.

End military-civil separation

Of immediate relevance in Brussels is the report’s call to remove Germany’s “strict” separation between military and civilian research. By having too strong a wall in between, Germany is depriving itself of the beneficial “spillovers” between the two sectors, the report says.

Germany’s economy and climate minister Robert Habeck has backed the recommendation, telling Handelsblatt that military-related innovation and research needs more support. The country’s science minister, Bettina Stark-Watzinger, has also called for the wall between civilian and military research to be dismantled.

Last month, the European Commission put forward proposals to allow the successor to Horizon Europe, FP10, which will start in 2028, to include dual use research and technologies. But member states will have to agree.

The expert commission also warns that Germany’s new innovation agency, Sprin-D, founded in 2019 to ape the US’s Defense Advanced Research Projects Agency (Darpa), still does not have enough freedom, despite the passage of a law in late 2023 lifting some constraints.

Following that law, Sprin-D can now independently select which founders and start-ups to finance. Only one ministry now supervises the agency, rather than three as before. It can also pay its employees more than other government jobs, so it can compete with the private sector.

But unlike Darpa, “political influence” still remains over Sprin-D, the commission warns, potentially limiting its freedom. Several ministries, and two lawmakers, have positions on the agency’s supervisory board.

Real world laboratories

The expert commission also urges the government to bring in a mooted law to create so-called Real World Laboratories – also known as regulatory sandboxes – as soon as possible. The idea is that they cut back on normal rules around testing new innovations, making commercialisation easier.

Berlin started consulting on the law in August last year. The report says that exceptions need to be framed “as broadly as possible”, otherwise they will quickly become obsolete.

The report also warns that German scientific institutions still struggle to seamlessly transfer intellectual property to new companies – there are often “lengthy and potentially unsuccessful negotiations” between the two sides.

Concerns about whether IP transfer to a new start-up violates EU state aid rules complicates this process. Universities and research institutes sometimes demand fixed payments from these start-ups, which can hinder their success.

In response, a coalition of German universities have launched a model called IP Transfer 3.0, which waives IP donors’ voting rights, making start-ups more attractive to investors.