Fact of the Week: Increasing Applied Research Contracts With a Public Research Organization by 1 Percent Raised Firms' Sales by 18 Percent and Productivity by 12 Percent

Caleb Foote April 8, 2019
April 8, 2019

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Increasing applied research contracts with a public research organization by 1 percent raised German firms’ sales by 18 percent and productivity by 12 percent over 15 years.

Source: Diego Comin et al., “Do Companies Benefit from Public Research Organizations? The Impact of the Fraunhofer Society in Germany,” ZEW Discussion Papers, No. 19-006, January 2019.

Commentary: The Fraunhofer Gesellschaft (FhG), a German nonprofit organization that conducts applied research, started about 6,500 projects per year with private firms between 1997 and 2014, and new research shows the firms reap substantial benefits from the collaboration. The analysis finds that a 1 percent increase in a firm’s contract with FhG increases its sales growth rate by 1.3 percent and its productivity growth rate 0.8 percent, representing 18 percent higher sales and 12 percent higher productivity over 15 years. Further, if FhG doubled its work with private firms (an additional investment of €680 million) researchers estimate Germany’s total productivity would increase by 0.55 percent.