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

37 Pages Posted: 28 Dec 2017

See all articles by Wim Naudé

Wim Naudé

University College Cork - Cork University Business School; RWTH Aachen University; IZA Institute of Labor Economics

Paula Nagler

Maastricht University

Date Written: January 4, 2018


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.

Keywords: Entrepreneurship, Germany, Innovation, Social Protection, Industrial Policy

JEL Classification: D31, L26, O33, O38, O52

Suggested Citation

Naudé, Wim and Nagler, Paula, Technological Innovation, Entrepreneurship and Productivity in Germany, 1871-2015 (January 4, 2018). SWPS 2018-02, Available at SSRN: or

Wim Naudé (Contact Author)

University College Cork - Cork University Business School ( email )

West Wing, Main Quadrangle, College Road

RWTH Aachen University ( email )

Templergraben 55
52056 Aachen, 52056

IZA Institute of Labor Economics ( email )

P.O. Box 7240
Bonn, D-53072

Paula Nagler

Maastricht University ( email )

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