D5.12 Country Report Germany FINAL
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FIRES-Reform Strategy for Germany Sanders, M., M. Fritsch, A. Herrmann, G. Latifi, B. Pager, L. Szerb, E. Terragno Bogliaccini and M. Wyrwich Document Identifier Part II, chapter 1 of D5.12 An institutional reform strategy for Germany, for Italy, and for the UK Version 3.0 Date Due M36 Submission date 25-04-2018 WorkPackage 5 Lead Beneficiary UU Version Date Amended by Changes 1.0 2.0 Partners involved Partner Number People involved name 1.0 1.0 1.0 2 Contents List of abbreviations .............................................................................................................. 4 List of tables .......................................................................................................................... 4 List of figures ........................................................................................................................ 4 Executive Summary ............................................................................................................... 5 Introduction .......................................................................................................................... 6 Step 1: Historical Roots of Institutions and Recent Policies .................................................... 7 1.1 United, divided, reunited – a short history of Germany ........................................ 7 1.2 Institutions governing knowledge transfer ............................................................ 9 1.2.1 A historical background of German education .................................................. 9 1.2.2 The Patent System ......................................................................................... 11 1.3 Financial development of Germany: Banks ......................................................... 11 1.4 Labour markets in Germany ............................................................................... 12 1.4.1 Employment protection ................................................................................. 12 1.4.2 Wage bargaining ............................................................................................ 13 1.4.3 Social security ................................................................................................ 14 1.5 Recent entrepreneurship policies in Germany .................................................... 14 1.5.1 Entrepreneurship in divided Germany: 1945-1989 ......................................... 14 1.5.2 Entrepreneurship and entrepreneurship policy after unification .................... 15 1.6 Conclusion .......................................................................................................... 17 Step 2: Data Analysis with GEI & REDI for Germany ............................................................. 18 2.1 Self-employment and business formation in Germany since 1991 ...................... 18 2.2 Germany’s international position ....................................................................... 22 2.3 A more detailed quick scan ................................................................................. 26 2.4 A tide lifting all boats or investing in excellence? ................................................ 33 2.5 Overall conclusions GEI-REDI analysis ................................................................. 36 Step 3: Triangulating History, Data and Survey results ......................................................... 37 3.1 Regulatory barriers to entrepreneurship in Germany.......................................... 37 3.2 Founders’ suggestions for reforms in Germany ................................................... 39 3.3 Conclusions ........................................................................................................ 41 Step 4: Mapping onto the FIRES-reform proposals .............................................................. 42 Conclusions ......................................................................................................................... 48 Bibliography ........................................................................................................................ 49 3 List of abbreviations List of tables List of figures 4 Executive Summary 5 Introduction In Part I we have introduced 64 proposals for a more Entrepreneurial Society in Europe. Inevitably, however, these proposed reforms are general and motivated from a broad base of evidence and scientific debate. The resulting table thus gives us a menu of possibly useful interventions that would have to be implemented at different levels in the European Union. To support more entrepreneurial venturing in Europe, however, institutions need to be supportive of individual entrepreneurial ventures “on the ground”. That is, supporting institutions should work in very specific contexts. To implement an effective strategy, European policy makers therefore must work simultaneously and coherently across policy making levels and jurisdictions. Reforming e.g. intellectual property rights protection is an international discussion, whereas proposals related to taxation, social security and education are typically matters of national or even regional policy, while policies to promote knowledge exchange between academic and research institutes and the local entrepreneurial ecosystem, is best organised at the regional or local level. In recognition of these layered interactions, we have carefully analysed the relevant policy making institutions and their legal and political competencies on the nine areas of policy making identified in Part I of this report. The results of that analysis in FIRES working package 6 are reported in detail in D6.2. With that analysis in place we now present our seven-step approach to formulating an effective reform strategy at the country level. • Step 1: Assess the most salient features of the institutional complex in place and trace its deep historical roots (WP2). • Step 2: Assess the strengths and weaknesses and flag the bottlenecks in the entrepreneurial ecosystem using a structured data analysis (WP4). • Step 3: Identify, using careful primary data collection among entrepreneurial individuals (i.e. founders) what most salient features characterise the start-up process and where entrepreneurs face barriers (D5.1). • Step 4: Map the results of step 2 and 3 onto the menu of policy interventions developed in Part I of this report to identify potential interventions for the country under investigation. • Step 5: Carefully consider the list of proposals in light of the historical analysis under step 1 and fit the proposed reforms to the relevant local, regional and national institutional complex in place. • Step 6: Identify who should change what in what order for the reform strategy to have the highest chance of success (WP6). • Step 7: Experiment, evaluate and learn and return to step 1 for the next iteration. In this second part of this report we will illustrate this cycle from step 1 to 5. Step 6 is described in D6.2 for Part I and D6.3 reports on the results of the policy round tables where the resulting draft reform strategies were discussed. As we cannot implement the proposed policies to execute step 7, instead we have summarised the resulting reform strategies for Italy, Germany and the United Kingdom into three policy briefs that were presented and discussed with policy makers in these respective member states. The policy briefs and summaries of these round tables in the annex complete this deliverable. 6 Step 1: Historical Roots of Institutions and Recent Policies 1.1 United, divided, reunited – a short history of Germany Germany is a north-central European country. In the centuries following the regency of Charlemagne, countries such as France, Spain, England, and Habsburg Austria developed into centralised states. In contrast, the so-called Holy Roman Empire of German nation, as Germany was called since the times of Charlemagne, became increasingly fragmented because the emperors had to “buy” the loyalty of kings, princes, and dukes within the empire. This implied granting territorial and governance concessions. When the Treaty of Westphalia ended the Thirty Years' War in 1648, the area that we know as Germany today was comprised of hundreds of sovereign kingdoms, principalities, and dukedoms. This political fragmentation continued until the German Empire was established in 1871 (Falck et al., 2011). The political fragmentation until the late 19th century implied a huge regional variation in culture and institutions that persists until today. One example for these cultural differences is the unique regional fragmentation of areas that have either a predominantly Protestant or Catholic tradition. Religious tensions erupted in the Thirty-Year War (1618-1648) that devastated many of the German states. Between the emergence of Martin Luther’s critique of the Church in Rome (1517) and the Treaty of Westphalia (1648), many German states, mostly in the North and Centre adopted the new, Protestant faith while other, more Southern and Western parts of Germany remained Catholic instead (Cantoni, 2012).1 The historical development until the late 19th century explains the strong federal tradition of the country that is also reflected in the current political system and political decision-making where the so-called 16 Bundesländer (states) play an important role. Hence, any well-informed entrepreneurship policy needs to take into account the historically-grown federal character of Germany. German Unification was pursued by the