German technology policy, innovation, and national institutional frameworks
The pattern of innovation in Germany is substantially different from that in the US and the UK. It is argued that German patterns of innovation - incremental innovation in high quality products especially in engineering and chemicals - require long-term capital, highly cooperative unions and powerful employer associations, effective vocational training systems and close long-term cooperation between companies and with research institutes and university departments. (The more radical high-technology innovation typical of the US and the UK benefits by contrast from less regulated market conditions.) These conditions are met by the incentives and constraints of the institutional framework in which companies located in Germany are embedded. It is suggested that German technology policy is appropriate to and important for this pattern of high-quality incremental innovation. Moreover, the institutional framework - especially the role of powerful business associations - can solve the collective action problems to which German-type technology policy would normally be exposed.