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
10-11 November 2014, Berlin
1

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
What Impact has Financialization?
2

R&D Expenditure in % of GDP
R&D Personnel (full-time equivalent) per 1,000
Dependent Labor Force (in %) from 1995 to 2012
Schasse, U. et al.. (2014): Forschungs- und Entwicklungsaktivitäten der deutschen Wirtschaft: Studien zum deutschen Innovationssystem
Nr. 2-2014, NIW, DIW, SDW, Hannover: p. 17 and 58.
Germany
Private Sector: 61.2%
Public Sector: 28.8%
3

The Classical Profile of Sectoral Distribution has been maintained
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
Services
DV-Equipment, Optoelectronical Products
Pharmaceuticals
Automotive Engineering
Other Industries
Air and Space Vehicles
Mechanical Engineering
Chemicals
*OECD-24: GER, FRA, GBR, Electrical Engineering
ITA, BEL, NED, DEN, IRL, ESP,
POR, SWE, FIN, AUT, POL,
HUN, CZE, SVK, SLO, NOR,
Other Economic Branches
TUR, USA, JPN, KOR, AUS.
Other Vehicles
Schasse, U. et al.. (2014): p. 42.
4

Access to Finance is not a critical Issue
Importance of Hindrances for the Achievement of Business Goals of Companies in Germany, 2010-12
Relative Share of all Companies
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
5
Aschhoff, B. et al. (2013): Dokumentation zur Innovationserhebung 2013, Dokumentation Nr. 14-01, ZEW, Mannheim und Karlsruhe: p. 107.

Growth Dynamics are the strongest in the upper Midmarket
Sales Growth 2006-2012 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. 6
( https://www.ikb.de/MediaLibrary/139648e7-34ab-43ad-a010-fbe04033d1b7/140818_IKB_Studie_Finanzierungsmuster%20im%20Mittelstand.pdf
, 05.11.2014)

Banks lose in Importance and Pension Funds still play a minor Role
Credit Volume and GDP on a quarterly Basis in
Germany (Index first Quarter 2000 = 100)
Credits to Companies and Self-employed
GDP (nominal)
Investments of Pension Funds in % of GDP, 2012
Switzerland
United Kingdom
Australia
USA
Canada
Japan
Spain
Germany
Italy
7
Creditreform and IKB (2014): p. 23 and 27.

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

Example One:
The IG-Metall Campaign „ Better instead of Cheaper “
• 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
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IG Metall (2014): Besser statt billiger: Innovationen mit Mehrwert für sichere und gute Arbeit, Düsseldorf.

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

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
“
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 2013-2017
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)
Training and further
Education
Future Workforce
Future and Need oriented Educational
Planning and Education of future Employees in academic and technical
Occupations
Challenge: The Coexistence of current and new Fields of
Activities and the associated double Competency Requirements
Meißner, H.-R. (2014)

Labour Institutions as Drivers of Innovation - continued
Example Four: Labour‘s Innovation Funds at Volkswagen
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
Project
Funding
Criteria
 For risky Projects at an early
Stage
 The Project must have a positive Impact on the Site concerned and should contribute to Job Security
VW (2014): Business Information, Wolfsburg.
Innovation Fund II – 20 Mio. € p.a.
• Since 2011
• Generation of new Fields of
Activities
• Diversification
• Searching for new Business
Models
 Degree of Innovation (Idea, Technique or
Project must constitute a genuine Innovation)
 Prospect of Profitability
 Securing Employment
 Implementability at one of the domestic Sites
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Sustainable
Mobility
Alternative
Drive
Concepts and
Components
Raw
Material and
Energy
Efficiency
New Fields of Activities
New Vehicle
Design
Concepts and
Components
Sustainable
Energy
Production
Prospect of
Profitability and
Employment
Autonomous and Mobil
Assistants
Health and
Ergonomics
VW (2014): Business Information, Wolfsburg.
Environment Energy
Machinery and Plant
Engineering
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• 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)
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