Small and medium-sized entities (SMEs) miss out when it comes to receiving public research funding. This fact was revealed by a study conducted by the »Institut der deutschen Wirtschaft Köln Consult« (IW Consult) in Cologne. According to this study, just 8% of small companies (those generating up to 1 million Euros of annual turnover) received public research funding in the past five years. On the other hand, one third of those companies with more than 250 million Euros of annual turnover domiciled in Germany receive public funding for research and development (R&D).
At the same time public funding plays an important role in serving as an incentive to small and medium-sized entities. Those companies which were supported by the state in 2005 spent 30% of their turnover on research and development, whereas those without it spent only 4%. However, funding is not the only way by which the state may encourage SMEs to invest in R&D. Thus, IW Consult recommends setting up a joint internet portal listing all funding programmes by the Federal government and the Federal Laender. Furthermore, the bureaucratic paperwork for funding applications should be reduced. In order not to limit research funding to just a few technologies and projects, it would be reasonable to grant companies tax credits on their R&D expenditures. 