Do Companies Benefit from Public Research Organizations? The Impact of the Fraunhofer Society in Germany

47 Pages Posted: 18 Mar 2019

See all articles by Diego Comin

Diego Comin

Dartmouth College

Georg Licht

Center for European Economic Research (ZEW)

Maikel Pellens

Ghent University; MSI, Faculty of Business and Economics, KULeuven; Centre for European Economic Research

Torben Schubert

Fraunhofer Institut für Systemtechnik und Innovationsforschung

Date Written: 2019

Abstract

Among available policy levers to boost innovation, investment in applied research organisations has received little empirical attention. In this paper, we analyse the case of the Fraunhofer Society, the largest public applied research organization in Germany. We analyse whether project interaction with Fraunhofer affects the performance and strategic orientation of firms. To that end, we assemble a unique dataset based on the confidential Fraunhofer-internal project management system and merge it with the German contribution to the Community Innovation Survey (CIS), which contains panel information on firm performance. Using instrumental variables that exploit the scale heteroscedasticity of the independent variable (Lewbel, 2012), we identify the causal effects of Fraunhofer interactions on firm performance and strategies. We find a strong, positive effect of project interaction on growth in turnover and productivity. In particular, we find that a one percent increase in the size of the contracts with FhG leads to an increase in growth rate of sales by 1.3 percentage points, and to an increase in the growth rate of productivity by 0.8 percentage points in the short-run. We also provide evidence of considerable long-run effects accumulating to 18% growth in sales and 12% growth in productivity over the course of 15 years. More detailed analyses reveal, amongst others, that the performance effects become stronger the more often firms interact with Fraunhofer and that interactions aiming at generation of technology have a stronger effect than interactions aiming merely at the implementation of existing technologies. Finally, we provide evidence on the macroeconomic productivity effects of Fraunhofer interactions on the German economy. Our results indicate that doubling Fraunhofer revenues from industry (+€ 0.68 bn.) would increase overall productivity in the German economy by 0.55%.

Keywords: Innovation, R&D, diffusion, applied research, Fraunhofer

JEL Classification: O33, O38

Suggested Citation

Comin, Diego and Licht, Georg and Pellens, Maikel and Schubert, Torben, Do Companies Benefit from Public Research Organizations? The Impact of the Fraunhofer Society in Germany (2019). ZEW - Centre for European Economic Research Discussion Paper No. 19-006. Available at SSRN: https://ssrn.com/abstract=3354365 or http://dx.doi.org/10.2139/ssrn.3354365

Diego Comin (Contact Author)

Dartmouth College ( email )

Department of Sociology
Hanover, NH 03755
United States

Georg Licht

Center for European Economic Research (ZEW) ( email )

P.O. Box 10 34 43
L 7,1 D-68161 Mannheim
Germany

Maikel Pellens

Ghent University ( email )

Ghent, 9000
Belgium

MSI, Faculty of Business and Economics, KULeuven ( email )

Naamsestraat 69
Leuven, B-3000
Belgium

Centre for European Economic Research ( email )

P.O. Box 10 34 43
L 7,1 D-68161 Mannheim
Germany

Torben Schubert

Fraunhofer Institut für Systemtechnik und Innovationsforschung ( email )

Breslauer Str. 48
Karlsruhe, 76139
United States

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