The Corona crisis is causing opposing developments in the innovative power of medium-sized companies in Germany. Almost a quarter of the medium-sized companies surveyed by KfW have Digitalization of their processes during the coronavirus crisis (23 percent). Another 28 percent maintained their level of digitalization. 14 percent even reduced their digitalization activity. 36 percent weren't engaged in any digitalization activities before the coronavirus pandemic and aren't engaging in it now. Overall, this represents a significant increase in the digitalization effect of the coronavirus pandemic.
The picture is less positive when it comes to innovation activity. Only 10 percent have become more active in this area, 17 percent have remained unchanged, and 25 percent have even reduced their efforts. Forty-seven percent are still not driving any innovation. Many companies have evidently put longer-term innovation projects on hold in light of the crisis.
“Even in the aftermath of the crisis, a weakening of future investments is to be feared”
The Investigation shows a strong disparity in company size. Larger medium-sized companies implemented or even intensified their digitalization and innovation strategies even during the crisis. Smaller companies, on the other hand, had to scale back their efforts more frequently. Companies experiencing a sharp decline in sales, in particular, lacked funding for longer-term, strategic innovation and digitalization activities.
"The coronavirus crisis initially triggered a wave of innovation and digitalization in many companies, for example, through the expansion of home office capacities or changes in sales. However, this boost is superficial. We see that the coronavirus pandemic is putting a strain on future investments in SMEs as a whole. This applies directly to the period during the acute crisis,"
says Fritzi Köhler-Geib, Chief Economist at KfW.
"Even in the aftermath of the crisis, a weakening of future investments is to be feared, as companies will then invest more in their resilience. These financial resources will then be lacking for investments in greater competitiveness. Economic policy incentives can help defuse this conflict of objectives."
