The Links between Competitiveness, Firms' Innovative Activities and Public R&D Support in Germany: An Empirical Analysis

Industrial competitiveness is becoming an increasingly important issue. In years of recession, some companies perform worse on domestic markets or lose export shares. Most investigations of the competitiveness of nations are based on macroeconomic data. However, a country is not much like a business. A paper tries to provide a new answer based on science and technology indicators and econometric analysis. Competitiveness is studied on the microeconomic level for a sample of 161 domestic or foreign-owned companies located in western Germany. Their competitiveness is measured by 2 indicators: 1. the trading result (that is, either net profit or loss), and 2. the export share of (local) production. Statistics on investment and patents do not sufficiently explain competitiveness, but the scientific potential of the firms significantly explains the profit-turnover ratio. Thus, it seems to be the science base of technological activities that determines competitiveness. Public subventions facilitate scientific and technological activities in industry. It is particularly interesting to note that government support is oriented towards the science base of the client companies