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WZB Berlin Social Science Center. Ulrich Jürgens The German Case Labour Institutions as a Countervailing Power?. Conference on Financial Institutions for Innovation and Development Ford Foundation, Hans- Böckler Foundation, SOFI 10-11 November 2014, Berlin.

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slide1

WZB

Berlin Social Science Center

Ulrich Jürgens

The German Case

Labour Institutionsas a Countervailing Power?

Conference on Financial Institutions for Innovation and Development

Ford Foundation, Hans-Böckler Foundation, SOFI

10-11 November 2014, Berlin

characteristics of german corporate governance innovation systems
CharacteristicsofGerman Corporate Governance & Innovation Systems

Corporate Governance

Innovation System

R&D intensive

Industry (medium-high tech) dominated

Incrementalratherthandisruptive

  • Weakcapitalmarketexposure; patientcapital
  • Technical orientationofbusinessleaders
  • Strategic roleofbanksandsupervisoryboards
  • Co-determination oflabour

What Impact hasFinancialization?

r d intensity has been increasing
R&D Intensityhasbeenincreasing

R&D Expenditure in % of GDP

R&D Personnel (full-time equivalent) per 1,000 Dependent Labor Force (in %) from 1995 to 2012

Germany

Private Sector: 61.2%

Public Sector: 28.8%

Schasse, U. et al.. (2014): Forschungs- und Entwicklungsaktivitäten der

deutschen Wirtschaft: Studien zum deutschen Innovationssystem

Nr. 2-2014, NIW, DIW, SDW, Hannover: p. 17 and58.

the classical profile of sectoral distribution has been maintained
The Classical Profile ofSectoral Distribution hasbeenmaintained

Focus of R&D in Germany vis a vis OECD Countries, 2011

Relative shareoftheeconomicsector in R&D expendituresofthe total economy

Services

DV-Equipment, Opto-electronicalProducts

Pharmaceuticals

Automotive Engineering

Other Industries

Air and Space Vehicles

Mechanical Engineering

Chemicals

*OECD-24: GER, FRA, GBR, ITA, BEL, NED, DEN, IRL, ESP, POR, SWE, FIN, AUT, POL, HUN, CZE, SVK, SLO, NOR, TUR, USA, JPN, KOR, AUS.

Electrical Engineering

Other EconomicBranches

Other Vehicles

Schasse, U. et al.. (2014): p. 42.

slide5

Access toFinanceis not a criticalIssue

ImportanceofHindrancesfortheAchievementofBusiness Goals ofCompanies in Germany, 2010-12Relative Share of all Companies

Irrelevant

High

Medium

Low

Strong Price Competition

Strong Competition on ProductQuality and Marketing

Lack of Demand

Innovation donebyCompetitors

Market DominanceofCompetitor

Lack ofspecializedPersonnel

Lack ofsuitableSourcesofFinance

High Entry CoststonewMarkets

High Costsof State Regulation

Aschhoff, B. et al. (2013): Dokumentation zur Innovationserhebung 2013, Dokumentation Nr. 14-01, ZEW, Mannheim und Karlsruhe: p. 107.

growth dynamics are the strongest in the upper midmarket
Growth Dynamics arethestrongest in theupperMidmarket

Sales Growth 2006-2012 accordingtoTurnoverClasses in %

Turnover Volume in Mio. €

Creditreform and IKB (2014): Wachstum finanzieren. Eine Analyse der sich wandelnden Finanzierungsmuster im deutschen Mittelstand, Düsseldorf: p. 8.

(https://www.ikb.de/MediaLibrary/139648e7-34ab-43ad-a010-fbe04033d1b7/140818_IKB_Studie_Finanzierungsmuster%20im%20Mittelstand.pdf, 05.11.2014)

slide7

Banks lose in Importanceand Pension Funds still play a minor Role

Credit Volume and GDP on a quarterly Basis in Germany (Index firstQuarter 2000 = 100)

Investments of Pension Funds in % of GDP, 2012

Creditsto Companies andSelf-employed

GDP (nominal)

Switzerland

United Kingdom

Australia

USA

Canada

Japan

Spain

Germany

Italy

Creditreform and IKB (2014): p. 23 and 27.

internal financing has been increasing
Internal Financinghasbeenincreasing

Volume of Internal andExternalFinancing in Bill. €

ExternalFinancing

Internal Financing

Creditreform and IKB (2014): p. 29.

labour institutions as drivers of innovation
Labour Institutions as Drivers of Innovation

Example One:The IG-Metall Campaign „BetterinsteadofCheaper“

  • Promotion ofbetterworkingconditions, aswellas high productqualityand innovative processesandproducts
  • Focus on developingargumentsandideasforsustainableeconomicactivitieswithinthecompany
  • Major approaches
    • Strategyworkshopsandfutureworkshops
    • Analysis ofinnovationabilitiesandcapacities
    • Advice on establishing an earlywarningsystemwithregardtoneglectinginnovations
    • Analysesconcerning material consumptionandtheefficiencyoftheuseofenergyandressources
    • Employeesuggestionsystem
    • Assessment ofnewtechnologiesandproductinnovations

IG Metall (2014): Besser statt billiger: Innovationen mit Mehrwert für sichere und gute Arbeit, Düsseldorf.

slide10

Labour Institutions as Drivers of Innovation - continued

ExampleTwo: Involvement oftheNational IG Metall in theSteeringCommiteeoftheIndustry 4.0 Programme

Kurz, C. (2013): Potenzial, Auswirkungen und Gestaltungsbedarf aus Sicht der IG Metall, Presentation at TU Berlin: p. 24.

slide11

ExampleThree: Involvement ofthe regional IG Metall in theActivitiesoftheGovernment Programme „National PlatformforElectromobility“

Labour Institutions as Drivers of Innovation - continued

National PlanElectromobility

National PlatformElectromobility

4 Showcase Projects

amongstothers Bayern/Sachsen

IG Metall leadsAG 3 Qualification

Future Workforce

Future and Need oriented Educational Planningand Education offutureEmployees in academicandtechnicalOccupations

ExistingWorkforce

Further Training and Education oftheexistingWorkforcefornewlyrequiredCompetencies

-Fornew Products, ProceduresandProcesses

-Upskilling (i.e. 1000V andAutomatization)

Training andfurther Education

Works Councilsof Audi, BMW, ZF + Regional IG MetalldevelopQualification Modules

forElectromobility

Duration 2013-2017

Challenge: The Coexistenceofcurrentandnew Fields ofActivitiesandtheassociated double CompetencyRequirements

Meißner, H.-R. (2014)

example four labour s innovation funds at volkswagen

Labour Institutions as Drivers of Innovation - continued

ExampleFour: Labour‘s Innovation Funds at Volkswagen

Collective Labor Agreement

„Zukunfts-Tarifvertrag“ 2006/2009

IG Metall & Volkswagen AG

Forrisky Projects at an early Stage

The Project must have a positive Impact on the Site concernedandshouldcontributeto Job Security

  • DegreeofInnovation (Idea, TechniqueorProject must constitute a genuine Innovation)
  • ProspectofProfitability
  • SecuringEmployment
  • Implementability at oneofthedomesticSites

Project FundingCriteria

VW (2014): Business Information, Wolfsburg.

innovation fund ii new fields of activities
Innovation Fund II: New Fields ofActivities

Alternative Drive Conceptsand Components

Sustainable Mobility

Raw Material andEnergy Efficiency

New Vehicle Design Conceptsand Components

SustainableEnergyProduction

Autonomousand Mobil Assistants

HealthandErgonomics

MachineryandPlant Engineering

VW (2014): Business Information, Wolfsburg.

conclusion
Conclusion
  • Labour Institutionscanfunctionascountervailing Power toCapital Market Pressure
  • Theycan also be a Driver ofInnovation on different Levels (Company, Regional/Sectoral, Economy)