New study by IW Consult and Santiago

Strengthen the innovation culture in chemical companies and reduce bureaucracy

What needs to be done to strengthen innovation in the chemical industry? What are the hindrances? Answers to these questions are given in a new study conducted by IW Consult and the management consultants Santiago for the German chemical industry association (VCI). Just under 200 VCI member companies from Germany’s third largest industry took part in this exercise.

What strengthens, what hinders innovation in the chemical industry? - From the right: Marijn Dekkers, President of VCI, Utz Tillmann, director-general of VCI and Juan Rigall (Santiago) presented the new study "Pave the Way for Innovation". - Photo: © VCI / René Spalek
What strengthens, what hinders innovation in the chemical industry? - From the right: Marijn Dekkers, President of VCI, Utz Tillmann, director-general of VCI and Juan Rigall (Santiago) presented the new study "Pave the Way for Innovation". - Photo: © VCI / René Spalek

The outcome: Most importantly, the innovation culture needs to further evolve inside the companies. At the same time, unnecessary bureaucracy should be reduced and complex regulations should be simplified. More or less to the same degree, internal and external hurdles render research and development more difficult.

VCI President Dr Marijn Dekkers said at the presentation of the study “Innovationen den Weg ebnen“ (“Pave the Way for Innovation”) in Frankfurt: “Germany is a good location for the chemical-pharmaceutical industry. But countries like China, India and South Korea are catching up fast as research locations. Companies and politicians need to make a joint effort, so that Germany will remain an attractive and well-performing innovation location also in the future.”

Improve the innovation culture of the industry

The study identifies the innovation culture inside the companies as the largest internal hindrance. As to the underlying reasons the companies state, amongst others, an overly large number of projects, company-internal bureaucracy and long decision paths. In well over one third of the companies the intra-corporate flows are not sufficiently oriented to innovations that can completely change a market.

The authors of the study recommend a clear innovation strategy with a long-term design and a clear product portfolio. They also recommend a stronger focus on disruptive innovations and novel business models. The top management needs to live and demonstrate a corporate culture oriented to innovations. Free scope should be given and staff systems need to be adapted accordingly. Companies should endeavour more cooperations and seek stakes in interesting start-ups.

Regulation and bureaucracy are the major hindrances to innovation

Another core statement from the study: Most companies find that the complexity of regulation is higher in Germany than in other countries. Mainly resource-intensive licensing and approval procedures for chemical products and the connected costs put an excessive strain on small and medium-sized enterprises (SMEs).

In more detail, the study shows that licensing and approval procedures involve strong or medium-strong innovation hindrances for over half of the companies – with regulatory burdens impacting mainly pharmaceutical and plant protection businesses. The European chemicals regulation REACH makes innovation more difficult too: Just under half of the companies experience impairments due to the costs and the personnel input connected with REACH.

Lack of qualified staff is felt by SMEs

The analysis by IW Consult and Santiago also looks into the shortage of skilled workforce. This is felt already today, mainly by SMEs. One fourth of companies with fewer than 1000 employees have difficulties in hiring suitable personnel with a university qualification; in some cases, the same holds true also for non-academic staff. Therefore, the authors of the study call for more mathematical-science teaching. Furthermore, Germany should facilitate and promote the influx of highly qualified staff from abroad.

Funding and promotion are not conducive enough to innovation

In order to strengthen the funding of innovations – particularly in SMEs and start-ups – the authors of the study find that fiscal incentives for research and straight-forward project promotion for SMEs are just as important as better financing possibilities for start-up founders with venture capital. The study provides the relevant facts: Well over one third of the companies see a lack of fiscal incentives for research as a strong or medium hindrance to innovation. As concerns funding, one fifth of the companies respond that underdeveloped venture capital markets are an innovation hindrance for them.

More societal acceptance is needed for innovations

There is a need for action especially regarding the acceptance in society. This is also substantiated by the results of the study: One third of the companies want more political and societal acceptance for their innovation achievements. Dekkers emphasizes: “This is nothing that can be demanded in a one-sided manner. This is something we need to work for continually in a dialogue.” He adds: “The public debate can be uncomfortable sometimes, but it is indispensable. Companies, associations and scientists need to engage in an early and transparent exchange about new technologies with the general public. Here, politicians have an important role as moderators.”

About the study

Nearly 200 VCI member companies took part in the survey. For the purpose of this study, additionally ca. 70 interviews were held with experts, customers and cooperation partners from science. Thus the study is representative, covering the whole breadth of the chemical-pharmaceutical industry in Germany.

The brochure “Innovationen den Weg ebnen” (in German language) is available as a PDF file in the download section at the top of this page. Also available there: the charts of the press conference in diverse formats as well as the full statement of Marijn Dekkers, president of VCI (the latter in English). Additionally, you will find there the study itself and an appendix with the guidances for the interviews with experts and the online questionnaire (all in German language).

Please note: Photos from the press conference will be available from around 1 p.m. in the photo section of our "Mediathek" which is linked here.

The VCI represents the politico-economic interests of over 1,650 German chemical companies and German subsidiaries of foreign businesses. For this purpose, the VCI is in contact with politicians, public authorities, other industries, science and media.The VCI stands for over 90 percent of the chemical industry in Germany. In 2014 the German chemical industry realised sales of more than 190 billion euros and employed 444,800 staff.

Contact: VCI Press Dept., Phone: +49 69 2556-1496, E-Mail:
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M.A. Monika von Zedlitz