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Emerging from the Corona crisis with clever research and innovation policies

The Commission of Experts for Research and Innovation (EFI) of the German Federal Government, of which the Passau economist Professor Carolin Häussler is also a member, has published some recommendations for the rebooting of the economy following the Corona shutdown. 

Professor Carolin Häussler

Professor Carolin Häussler

researches co-operation and innovation

How can we use and increase the innovative strength of fluid organisations?

How can we use and increase the innovative strength of fluid organisations?

Professor Carolin Haeussler has held the Chair of Organisation, Technology Management and Entrepreneurship since 2011 and has been bringing researchers from all over the world to Passau with the International Centre for Economics and Business Studies.

The Corona crisis and the political reactions to it have caught the world economy in a phase of great structural and social challenge, for example climatic change, the digital transformation of the economy, and demographic trends. Hard hit by the shutdown, business and science are beginning to redirect their research and innovation activities to help overcome this acute pandemic. Medical-pharmacological research, for example, has been forced to develop vaccines and therapeutic agents to combat COVID-19. The commission of experts is confident that the innovation race that has now started will lead to novel medical solutions that will be able to help surmount and / or relieve the Corona pandemic. Having said that, there have in some cases been massive cuts in the research and innovation activities which were put in place to meet the long-term challenges mentioned above.

However, the commission of experts has warned against neglecting those major structural and social challenges. They must continue to be addressed with research and innovation because they are certain to last longer than the Corona crisis. That calls for efforts at least as great as those currently required in dealing with the pandemic. But the resources required for that are threatening to run short on account of the severe recession resulting from the global shutdown, historically unique, and that also applies to national economies that are strong on innovation like that of Germany.

The German research and innovation policymakers must remain true to their funding philosophy and should, in the long term, continue to gear it

according to the commission of experts (EFI)

That is why, in a step-by-step Corona exit scenario, it is important for the German policymakers to take active measures to avoid economic collapse, maintain productive capacities and thus improve the conditions for a fast restart of the economy. However, that alone will hardly be enough to put enterprises which are under great financial strain in many sectors on account of the pandemic back in a position where they can accompany the structural change – which is taking place regardless of the Corona crisis – with the necessary investments and innovations.

The German research and innovation policymakers must remain true to their funding philosophy and should, in the long term, continue to gear it – as in recent years in the context of the High-Tech Strategy – to strategic objectives of major societal importance. But to be successful, they must adopt short and mid-term perspectives as well as long-term ones. Enterprises with a great potential for innovation in particular need to get through the Corona crisis with as little damage as possible, so that they are then in a position to switch their research and innovation activities quickly back to tackling long-term societal challenges when the economy is rebooted.

Ensuring the liquidity of enterprises, putting an economic stimulus programme in place that is innovation-oriented and topping up funding programmes for research and innovation

In the view of the commission, the federal government and those of the individual states should accompany the restart of the economy following the shutdown with an innovation-oriented policy that starts at three points:

  • Short term: Necessary above all in the short term are support measures to improve the liquidity of structurally healthy enterprises which have been hit by the recession but have sustainable business models at their core. The federal government has already taken a step in this direction by creating the possibility of simplified loss carry-back for small enterprises and the self-employed. With regard to enterprises that are actively innovative, moreover, a lowering of the contribution they have to make when availing themselves of public programmes for research and innovation funding is also worthy of recommendation. That could reduce financial obligations fast and unbureaucratically and obviate the risk of having to abort innovation projects which are already up and running during the crisis for lack of financial resources.
  • Mid-term: Economic stimulus packages will be necessary in the mid-term which give the economic engine in Germany a fresh boost. These need to be designed in such a way that they do not contradict the objectives of previous research and innovation policy. It follows that as large a share as possible of the designated funds should be put to use in an investment-related and innovation-oriented way. Programmes, for example, which are aimed at rectifying the weaknesses in the digital infrastructure that have come to light so clearly in the Corona crisis, are to be recommended here. If the policymakers plan any measures designed to support private consumption, they should be geared to social income compensation, but not to boosting demand for certain goods or services. Otherwise, as experience has shown, the measures will only spark off a brief flare of enthusiasm, tending to slow down innovation processes rather than speed them up, and may indeed also steer them in unwelcome directions. For these reasons, the commission of experts emphatically declares itself to be against the buyer's bonuses currently being called for by the automotive industry.
  • Long-term: In the long term, the strategically oriented research and innovation policies of recent years must be pursued vigorously, since the short and mid-term support measures only protect the innovation activities of the enterprises indirectly. A clear commitment by the federal government and those of the individual states not to make any sacrifices to this policy, in spite of the fact that the budgetary leeway available to them has been markedly reduced by the Corona crisis, may provide important planning security in the present situation, which is extremely uncertain. The funding programmes initiated before the crisis, for example in the context of the High-Tech Strategy 2025, should therefore be pursued along the same lines as before. At the same time, the commission of experts recommends an increase in the amounts of funding in order to cater to the economic position of the recipients, weakened as it has been by the current recession. Furthermore, the initiation of new long-term programmes for the funding of research and innovations should be looked into. These should concentrate on coping with new challenges which have come to light during the Corona pandemic, in particular in medicine and health, but also in relation to the resilience of social and economic systems.

The commission of experts is confident that a policy that is research and innovation-oriented in this sense, and supports and encourages the German economy, will not only provide important impulses that will help us to climb rapidly back up out of the valley that is Corona and maintain social cohesion. Such a policy will also ensure an improvement in the structural conditions for coping successfully with the major societal challenges that are still waiting to be tackled, and considerably enhance Germany's resilience in future fundamental crises.

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Since 2008, the EFI has been providing the federal government with scientific policy advice and submitting a report to it each year. Its main tasks are to analyse the strengths and weaknesses of the German innovation system in international comparison and develop recommendations for action for research and innovation policy on the basis of that analysis.

Source: EFI administrative office (Link in german)