Financing and implementing science, research and development

In 2014, the state and industry together invested almost 84 billion euro in research and development. This is equivalent to nearly 3% of the German GDP. Which is the role of the state and that of the industry? Which institutions are financed and by whom?

Both industry and the state support, finance and conduct research and development in Germany. The vast majority – more than two thirds – of R&D activities take place in Germany’s private sector, mostly in large companies. Universities, non-university and public research and science institutes account for approximately one third. The individual sectors report similar ratios for the distribution of R&D personnel in Germany. Furthermore, the important role of industry becomes clear when considering the funding of research and development. In 2013, the private sector financed 52.2 billion euros or just on two thirds of all gross domestic expenditure on research and development.

Research and development is carried out in a wide range of public and private institutions. This diversity of the German research and innovation system is reflected in the different sources of funding: R&D projects at public sector institutions also receive third-party funding, while some private research in companies is also publicly funded (cf. also the info box R&D expenditure).

Research and development expenditure has increased significantly in recent years. According to provisional estimates, in 2014, the state and industry together invested 83.9 billion euros in R&D. This is equivalent to 2.88% of the gross domestic product (GDP) and thus almost achieves the three-percent target identified by the Europe 2020 strategy. Therefore, Germany is in the top league of countries with a very high level of R&D intensity.

In 2013, by far the largest share of the public R&D budget was allocated to universities (49.7%) and non-university/federal/Länder and municipal research institutes (42.5%). Public funding and support of R&D in industry is mainly directed at small and medium-sized enterprises. They finance more than one seventh (16%) of their internal R&D expenditure from public funds.

R&D expenditure

The architecture of the German R&I system is deter-
mined by the country’s federal structure, the size and focus of its economy, and by the diversity of its many players. Gross domestic expenditure on research and development (GERD) is a key indicator of the R&D efforts of different countries and is used in international comparisons.

Overall, R&D expenditure was 79.73 billion euros in 2013. Contributions to GERD in the individual sectors in which R&D is carried out may differ widely: 53.57 billion euros, or approximately two thirds of GERD, were used in the private sector in 2013. The higher education sector appropriated approximately 14.30 billion euros. The federal, Länder and municipal research institutes and the private non-profit institutions show R&D expenditure of 11.86 billion euros.

The expenditure of the R&D performing stakeholders is financed by domestic industry, the government, private non-profit institutions and funding sources abroad. In 2013, the private sector financed 52.18 billion euros or approximately two thirds of GERD. Compared to other countries, this figure is extremely high and is regarded as a characteristic feature of the German R&I system. Approximately 30% of GERD is financed by the Federal Government, the Länder and private non-profit institutions. The remaining 5% is furnished by sources abroad (cf. also Fig. II-2).

Gross domestic expenditure on research and development (GERD) in the Federal Republic of Germany in 2013 (in billions of euros)

Fig. II-2: Gross domestic expenditure on research and development (GERD) in the Federal Republic of Germany in 2013 (in billions of euros)