German SMEs pessimistic

According to the Mittelstandsmonitor 2009 study, the recession has in the meantime also reached German small and medium-sized entities (SMEs) even though less seriously than internationally oriented major companies. Business expectations fell to a historic record low by the end of 2008. Nevertheless, reductions in investment and employment turned out to be relatively moderate. Once more down, however, was the number of newly founded businesses. The study in question also showed that older companies are not as active in research and development as younger businesses and that SMEs do less research and development than companies of larger size.

The number of newly founded businesses has been falling since the year 2005. Provisional calculations, however, show that the number of newly founded businesses has even more decreased in 2008. This downward trend with regard to business foundations might be due to the fact that up to the middle of 2008 the economic development had been quite good. This good economic climate led to a rising number of employees and less unemployment. This in turn resulted in a smaller propensity to set up new businesses. Due to the current crisis it is expected that this year more people will set up their own business in order to put an end to their unemployment.

Most business founders using external financial sources need micro financing. According to the EU definition, this comprises financing up to the amount of 25,000 Euros. In the year 2007 there were about 200,000 business founders who used micro financing which corresponded to a total volume of approximately one billion Euros. Quite often business founders planning to use micro financing have to struggle with particularly difficult problems.

Over the past ten years the number of companies being active in continuous research and development has moderately increased, while the number of those businesses coming up with innovative new products has decreased. Innovation activities of small and medium-sized entities have developed less than those of major companies.

About 20% of all patent applications in Germany are made by small and medium-sized entities (SMEs). This percentage is relatively small in proportion to the turnover generated by SMEs or the number of people employed by them. This relatively small percentage is due to the relatively small number of SMEs who are active in research and development. On the other hand, SMEs more than major companies tend to keep innovations secret instead of protecting them through a patent.

The Mittelstandsmonitor survey has been published since the year 2003 by the KfW finance group in co-operation with Creditreform as well as the IfM research institute in Bonn, the RWI in Essen and the ZEW in Mannheim. The survey is available for free-of-charge download. GERMAN