Germany’s small and medium‑sized businesses (the Mittelstand) have once again shown a bit more willingness to innovate. Between 2022 and 2024, 41 % – or 1.6 million firms – introduced at least one innovation over the past three years, a KfW study released on Wednesday reports. That figure is two percentage points higher than the 2021‑2023 period. In 2024 the Mittelstand spent €35.4 billion on innovation, €1.8 billion more than the previous year, and even when adjusted for inflation the spending rose by nearly three per cent.
Despite these modest gains, the study warns that overall innovation activity among German SMEs has been falling steadily since the mid‑2000s. Innovation is increasingly clustered in larger firms: 73 % of those with more than 50 employees produced an innovation recently, whereas only 37 % of companies with fewer than five employees did so. Large firms also account for the majority of innovation expenditure.
Dirk Schumacher, chief economist at KfW, welcomed the uptick but cautioned that the pace of innovation is still far below what it was in the past. “It’s encouraging that more companies are innovating again, especially given the still difficult economic climate” he said. “But the Mittelstand is so important to the German economy that we cannot be satisfied with the current level of activity. Its productivity and transformation capacity will be permanently weakened if a growing share of firms stop regularly renewing their production processes and product offerings”.
