Geography Reference
In-Depth Information
customized software and IT services. Users are directly involved in the value added
activities, because processes of knowledge exchange and knowledge sharing are
necessary from both sides and determine the quality of the software good.
Project organization is the dominant form of work organization in general and it is
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highly signii cant for the integration of external knowledge for the many small- or
medium-sized companies. As in other European countries in quantitative terms the
German software industry is dominated by small i rms.
High coordination costs as a result of the integration of myriad knowledge sources
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in the product and service development - the key function of formal and informal
network relations, the role of references and reputation as coordinating mecha-
nism for transactions and interactions.
The markets for knowledge-intensive business services are characterized by the high
volatility, uncertainty and ambiguity of projects, and marked heterogeneity of the com-
petencies involved. The low formal constraints on market access allow for fast market
entries, which, however, are accompanied by a high ratio of market exits.
Path dependency - the software industry in the German national innovation system
In international terms the software market is dominated by US-based i rms. The German
innovation system did not succeed in establishing itself in the new knowledge-intensive
service industries, like the software industry. According to Meyer-Krahmer (2001,
p. 208) the information technology (IT) industry is characterized by specialization disad-
vantages and is lagging far behind the dynamism found in the US. Even though software
production in Germany increased between 2003 and 2006 with a rate of 13.6 per cent, it
did not reach the dynamic level of Europe (16.4 per cent) in these years (EITO, 2006, pp.
199-207). The international performance of countries in a particular sector is mediated
by national and regional institutional settings. The complementary institutional arrange-
ments of the dominant technology-oriented development path of the German innovation
system are assessed as unfavourable for the emergence and success of the software sector
(BMBF, 1999, 2006, 2007).
The main feature of the long-term development path of Germany's national innova-
tion system is its distinct industry-based innovation proi le. In contrast to most other
larger economies, the R&D-intensive manufacturing industries maintained their mac-
roeconomic weight within the national economy in the last ten years. These industries
have an aggregate share of 39 per cent of the added value of the overall economy. Nearly
60 per cent of the country's total amount of export is R&D-intensive technology goods
(Table 19.1). In 2004 Germany was the largest exporter of technology goods with a share
of 14 per cent of world trade, compared to the USA with 13.2 per cent and Japan with
10.7 per cent (BMBF, 2007).
In international comparisons there is a common distinction at the level of industrial
sectors in a horizontal dimension that classii ed industries as high-tech, medium high-
tech or advanced, and as low-tech industries. Of course innovation happens in all kinds
of industry, but it is suggested that innovation processes and sector-specii c knowledge
bases have distinct dif erences. Radical innovations involving large expenditures on
R&D and analytical knowledge base are more common for high-tech industries, while
the development of incremental innovations based on cumulative knowledge bases
