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WZB Berlin Social Science Center Ulrich Jürgens The German Case Labour Institutions as a Countervailing Power? Conference on Financial Institutions for.

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Presentation on theme: "WZB Berlin Social Science Center Ulrich Jürgens The German Case Labour Institutions as a Countervailing Power? Conference on Financial Institutions for."— Presentation transcript:

1 WZB Berlin Social Science Center Ulrich Jürgens The German Case Labour Institutions as a Countervailing Power? Conference on Financial Institutions for Innovation and Development Ford Foundation, Hans-Böckler Foundation, SOFI November 2014, Berlin 1

2 Characteristics of German Corporate Governance & Innovation Systems Corporate Governance Weak capital market exposure; patient capital Technical orientation of business leaders Strategic role of banks and supervisory boards Co-determination of labour Innovation System R&D intensive Industry (medium-high tech) dominated Incremental rather than disruptive 2 What Impact has Financialization?

3 R&D Expenditure in % of GDP R&D Personnel (full-time equivalent) per 1,000 Dependent Labor Force (in %) from 1995 to Schasse, U. et al.. (2014): Forschungs- und Entwicklungsaktivitäten der deutschen Wirtschaft: Studien zum deutschen Innovationssystem Nr , NIW, DIW, SDW, Hannover: p. 17 and 58. Germany Private Sector: 61.2% Public Sector: 28.8% R&D Intensity has been increasing

4 The Classical Profile of Sectoral Distribution has been maintained 4 Schasse, U. et al.. (2014): p. 42. Focus of R&D in Germany vis a vis OECD Countries, 2011 Relative share of the economic sector in R&D expenditures of the total economy *OECD-24: GER, FRA, GBR, ITA, BEL, NED, DEN, IRL, ESP, POR, SWE, FIN, AUT, POL, HUN, CZE, SVK, SLO, NOR, TUR, USA, JPN, KOR, AUS. Services DV-Equipment, Opto- electronical Products Pharmaceuticals Automotive Engineering Other Industries Air and Space Vehicles Mechanical Engineering Chemicals Electrical Engineering Other Economic Branches Other Vehicles

5 Importance of Hindrances for the Achievement of Business Goals of Companies in Germany, Relative Share of all Companies 5 High Medium Low Irrelevant Strong Price Competition Strong Competition on Product Quality and Marketing Lack of Demand Innovation done by Competitors Market Dominance of Competitor Lack of specialized Personnel Lack of suitable Sources of Finance High Entry Costs to new Markets High Costs of State Regulation Aschhoff, B. et al. (2013): Dokumentation zur Innovationserhebung 2013, Dokumentation Nr , ZEW, Mannheim und Karlsruhe: p Access to Finance is not a critical Issue

6 Growth Dynamics are the strongest in the upper Midmarket 6 Sales Growth according to Turnover Classes in % Turnover Volume in Mio. € Creditreform and IKB (2014): Wachstum finanzieren. Eine Analyse der sich wandelnden Finanzierungsmuster im deutschen Mittelstand, Düsseldorf: p. 8. (https://www.ikb.de/MediaLibrary/139648e7-34ab-43ad-a010-fbe04033d1b7/140818_IKB_Studie_Finanzierungsmuster%20im%20Mittelstand.pdf, )https://www.ikb.de/MediaLibrary/139648e7-34ab-43ad-a010-fbe04033d1b7/140818_IKB_Studie_Finanzierungsmuster%20im%20Mittelstand.pdf

7 Credit Volume and GDP on a quarterly Basis in Germany (Index first Quarter 2000 = 100) Investments of Pension Funds in % of GDP, Credits to Companies and Self-employed GDP (nominal) Switzerland United Kingdom Australia USA Canada Japan Spain Germany Italy Creditreform and IKB (2014): p. 23 and 27. Banks lose in Importance and Pension Funds still play a minor Role

8 Internal Financing has been increasing 8 External Financing Internal Financing Creditreform and IKB (2014): p. 29. Volume of Internal and External Financing in Bill. €

9 Labour Institutions as Drivers of Innovation Promotion of better working conditions, as well as high product quality and innovative processes and products Focus on developing arguments and ideas for sustainable economic activities within the company Major approaches Strategy workshops and future workshops Analysis of innovation abilities and capacities Advice on establishing an early warning system with regard to neglecting innovations Analyses concerning material consumption and the efficiency of the use of energy and ressources Employee suggestion system Assessment of new technologies and product innovations IG Metall (2014): Besser statt billiger: Innovationen mit Mehrwert für sichere und gute Arbeit, Düsseldorf. 9 Example One: The IG-Metall Campaign „Better instead of Cheaper“

10 Example Two: Involvement of the National IG Metall in the Steering Commitee of the Industry 4.0 Programme 10 Kurz, C. (2013): Potenzial, Auswirkungen und Gestaltungsbedarf aus Sicht der IG Metall, Presentation at TU Berlin: p. 24. Labour Institutions as Drivers of Innovation - continued

11 National Plan Electromobility National Platform Electromobility 4 Showcase Projects amongst others Bayern/Sachsen IG Metall leads AG 3 Qualification Works Councils of Audi, BMW, ZF + Regional IG Metall develop Qualification Modules for Electromobility Duration Labour Institutions as Drivers of Innovation - continued Example Three: Involvement of the regional IG Metall in the Activities of the Government Programme „National Platform for Electromobility “ Training and further Education Challenge: The Coexistence of current and new Fields of Activities and the associated double Competency Requirements Existing Workforce Further Training and Education of the existing Workforce for newly required Competencies -For new Products, Procedures and Processes -Upskilling (i.e. 1000V and Automatization) Future Workforce Future and Need oriented Educational Planning and Education of future Employees in academic and technical Occupations Meißner, H.-R. (2014)

12 Collective Labor Agreement „Zukunfts-Tarifvertrag“ 2006/2009 IG Metall & Volkswagen AG Innovation Fund I – 20 Mio. € p.a. Since 2007 Strategic Site Development Strenghtening of domestic Sites Enhancement of technological Compentencies Innovation Fund II – 20 Mio. € p.a. Since 2011 Generation of new Fields of Activities Diversification Searching for new Business Models Example Four: Labour‘s Innovation Funds at Volkswagen 12 VW (2014): Business Information, Wolfsburg. Labour Institutions as Drivers of Innovation - continued  For risky Projects at an early Stage  The Project must have a positive Impact on the Site concerned and should contribute to Job Security Project Funding Criteria  Degree of Innovation (Idea, Technique or Project must constitute a genuine Innovation)  Prospect of Profitability  Securing Employment  Implementability at one of the domestic Sites

13 Innovation Fund II: New Fields of Activities New Fields of Activities Environment Prospect of Profitability and Employment Energy 13 Machinery and Plant Engineering Autonomous and Mobil Assistants New Vehicle Design Concepts and Components Alternative Drive Concepts and Components Sustainable Mobility Raw Material and Energy Efficiency Sustainable Energy Production Health and Ergonomics VW (2014): Business Information, Wolfsburg.

14 Conclusion Labour Institutions can function as countervailing Power to Capital Market Pressure They can also be a Driver of Innovation on different Levels (Company, Regional/Sectoral, Economy) 14


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