Outspend and outsmart the Germans

main 19136731 AP – Google Street View auto camera Berlin Brandenburger Gate 2008
Encroaching on their home turf. Source: AP

In the center of Berlin, an Amazon research center employs 500 people developing a range of solutions, including the next version of the Alexa personal assistant, and software that can sense precise levels of ripeness in fruit. Next year, Amazon will open a second research center in Berlin, as well as another for artificial intelligence research in the south-western university city of Tübingen. Other locations for Amazon research include Dresden and Aachen.

Globally, the US online retailer has become the biggest spender on research and development investment, overtaking last year’s biggest spender, VW. A ranking of the world’s 1,000 most research-intensive, listed companies shows the German carmaker dropped four places to number five, while Samsung fell two places to number four (see graphic below).

As the list suggests, American IT and technology companies are currently the biggest R&D spenders. “The list shows that big American IT and technology companies are well out in front in terms of innovation,” said Peter Gassmann, European head of PwC Strategy&, PwC’s strategy consulting group. VW and Mercedes-maker Daimler are the only two German firms in the top 20 globally, while drug makers such as Roche, from Switzerland, and Merck & Co complete the top 10.

R&D 24 p04 The Biggest Research and Development Budgets-01

The top three US IT companies, which also includes Intel, invest in all developments seen as potential growth drivers: from self-driving car technology to computer-driven wearable gadgets and clothing to new finance services, known as fintech. The German car industry, which also includes many non-listed firms, knows it has to up its game to stay relevant in the long term. The three big carmakers – VW, Daimler and BMW – are among Germany’s biggest research spenders and they have been pouring more money into electric cars, autonomous vehicles and mobility services to compete with new and upcoming rivals, such as Uber and Tesla. The three German carmakers spent $23.6 billion between them last year, compared with overall R&D spend for the 30 German blue-chip DAX companies of almost $60 billion, up 4 percent.

Rankings like PwC’s can overlook the research contribution of non-listed companies, which are particularly important in Germany. Privately-owned Bosch, for example, is the world’s largest car parts supplier and a dominant force in Europe for petrol-injection technologies and optical sensors. Outside the car industry, the Stuttgart-based firm is also a leader in digitizing the home and the urban environment – smart homes and smart cities. Car parts maker FZ Friedrichshafen, discount retailer Aldi and publishing group Bertelsmann, which owns Penguin Random House, are other examples of unlisted German companies that are among the global leaders in their industries.

24 p04 Germanys Biggest Research and Development Budgets-01 R&D

Within the 1,000 listed firms included in the survey, worldwide R&D expenditure came to around $702 billion between July 2016 and June 2017, an all-time high. That amounts to 4.5 percent of the companies’ revenue, which is also a new high. In some sectors, the proportion is much larger. Tech giants like Amazon and Alphabet spend over 10 percent of revenue on R&D. For big pharmaceutical companies, it is more like 20 percent.

Although American companies dominate in research spending, recent political developments may see Germany improve its standing. A PwC survey of 562 R&D managers worldwide revealed increasing nervousness about nationalism in some key technology markets. One third of R&D managers said economic nationalism was already making it hard for them to hire and keep top foreign research staff. Some 63 percent of the managers said they felt this trend posed a risk to the United States, followed by China (44 percent) and Britain (34 percent). Conversely, they saw Germany, Canada and France – comparatively liberal countries in this respect – standing to benefit from xenophobic tendencies elsewhere. Mr. Gassmann, from PwC’s strategy arm, said: “In the medium term, more liberal countries can benefit from this trend, for example, if multinationals relocate research facilities.”

Amazon may well be ahead of the curve with its research facility in Berlin and its new innovation center in southern Germany.

Ulf Sommer reports for Handelsblatt on companies and financial markets. Axel Höpner is head of the Handelsblatt office in Munich, focusing on the state of Bavaria’s companies, including Allianz and Siemens. Brían Hanrahan and Gilbert Kreijger adapted this article for Handelsblatt Global. To contact the authors: and

We hope you enjoyed this article

Make sure to sign up for our free newsletters too!