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Technological Innovation, Entrepreneurship and Productivity in Germany, 1871-2015

Author

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  • Wim Naudé

    () (Maastricht University, Maastricht School of Management and UNU-MERIT/MGSoG, Maastricht, The Netherlands and IZA-Institute of Labor Economics, Bonn, Germany)

  • Paula Nagler

    () (Erasmus Research & Business Support, Erasmus University Rotterdam and UNU-MERIT/MGSoG, Maastricht, The Netherlands.)

Abstract

Entrepreneurship in Germany has been stagnating. As a result, the effectiveness of technological innovation to improve labor productivity weakened, which has been implicated in rising income inequality and poverty. In this paper we provide an overview of technological innovation and labor productivity growth from 1871. From this we show that over the past three decades the economy has found it increasingly difficult to transform technological innovation into labor productivity growth: in glaring contrast to earlier periods. Despite higher spending on R&D and more personnel than ever working in research labs, labor productivity growth continues to decline. Two interrelated reasons are offered for this phenomenon. The first is that the national innovation system itself has certain weaknesses. The second is entrepreneurial stagnation. We discuss the weaknesses of the innovation system and the nature and causes of entrepreneurial stagnation. We call for policies that will improve the innovation system, educational and managerial capabilities, venture capital investments, and the contestability of markets. Strengthening social protection and raising real wages are important supportive measures.

Suggested Citation

  • Wim Naudé & Paula Nagler, 2018. "Technological Innovation, Entrepreneurship and Productivity in Germany, 1871-2015," SPRU Working Paper Series 2018-02, SPRU - Science Policy Research Unit, University of Sussex Business School.
  • Handle: RePEc:sru:ssewps:2018-02
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    References listed on IDEAS

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    Cited by:

    1. Gries, Thomas & Naudé, Wim, 2018. "Artificial Intelligence, Jobs, Inequality and Productivity: Does Aggregate Demand Matter?," IZA Discussion Papers 12005, Institute of Labor Economics (IZA).
    2. Naudé, Wim, 2019. "The Decline in Entrepreneurship in the West: Is Complexity Ossifying the Economy?," IZA Discussion Papers 12602, Institute of Labor Economics (IZA).
    3. Naudé, Wim, 2019. "The decline in entrepreneurship in the West: Is complexity ossifying the economy?," MERIT Working Papers 2019-030, United Nations University - Maastricht Economic and Social Research Institute on Innovation and Technology (MERIT).

    More about this item

    Keywords

    Entrepreneurship; Germany; Innovation; Social Protection; Industrial Policy;

    JEL classification:

    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • L26 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Entrepreneurship
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes
    • O38 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Government Policy
    • O52 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Europe

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