Study on the Potential Analysis of Regions in Structural Change

Tasks

Creating equal living conditions and reducing regional disparities in economic performance are important policy goals of the federal and state governments. In view of the fact that the export ratio of industry in the eastern German states, as well as in most structurally weak regions in western Germany, is significantly below the national average, supporting the internationalization of existing small and medium-sized enterprises (SME) seems to be a promising starting point for strengthening the economy in the regions concerned.

The study „Potential Analysis of Regions in Structural Change“ aims to provide Germany Trade & Invest GmbH (GTAI) with reliable information to improve the design of its advisory services and its activities in attracting foreign direct investment in these regions.

To this end, we create an overview of existing support offers for SMEs in structurally weak regions and identify possible optimization potential. Another focus is on identifying key characteristics of structurally weak regions as business locations in order to shed light on their strengths and future prospects.

Methods

First, a complete and compact overview of existing support programs for SMEs from structurally weak regions will be compiled. Based on this, a survey of at least 50 SMEs will be conducted to find out the extent to which the existing support programs are known and meet the needs of the companies. 

In addition, important regional location factors and existing industry focal points/clusters will be identified and presented in a compact form.

Data and other sources

The analysis relies on various official statistics and the results of a survey of SMEs in export-oriented industries. 

Results

The funding database created in this project includes 160 funding programs. By evaluating funding programs in the database, it was possible to determine that eastern and western German states are often similarly well-equipped with programs. Most are offered in the form of services or grants.  In few fields of funding in some Länder, however, there is low supply. This includes the fields “investments”, “research and innovation” and “human resources and education” and in particular the field “further training”. Here, the funding on part of the Länder should be expanded. The survey with 80 SMEs showed that the vast majority of companies that had already made use of programs were able to achieve their goals completely or at least partially. Dissatisfaction with the programs was caused in particular by bureaucracy. According to the survey, companies would like to see additional support for entering foreign markets.  

In order to present the location conditions of structurally weak regions (including the districts affected by the coal phase-out), a comprehensive regional database was created. Conceptually, the structurally weaker regions have less economic power, a less favorable labor market situation and in many cases a less favorable endowment with location factors relevant to settlement. However, these regions can indeed be interesting for potential investors both from Germany and abroad. This is because of the higher subsidy intensity. Also, compared to stronger regions, structurally weak regions suffer less from issues of population agglomeration and can often score with cost advantages (labor costs, regional taxes). In many cases, there is a good connection to supraregional infrastructures, either because many of these regions are located in central Germany or due to the well-developed transport network.  An overall indicator to rate the regions was developed, which enables an evaluation of all structurally weak regions in Germany. Calculations show that, in terms of location factors, there are many structurally weak regions that can compete with structurally strong regions.