Bureaucracy and shortage of skilled workers hamper SMEs' innovative strength
The Commission of Experts for Research and Innovation (EFI) presented its new annual report to Federal Chancellor Friedrich Merz in Berlin on February 11, 2026. In it, it emphasizes the importance of innovation for the competitiveness of German SMEs. Prof. Dr. Friederike Welter, President of the Institute for SME Research (IfM) Bonn and Professor of Management of Small and Medium-Sized Enterprises and Entrepreneurship at the University of Siegen, is a member of the expert commission.
As medium-sized companies - i.e. companies in which ownership and management coincide - make up the majority of companies in Germany, their innovation activity is decisive for the innovation landscape in Germany. Taking into account characteristics such as company size or sector affiliation, SMEs succeed in introducing product or process innovations more often than comparable non-medium-sized companies.
It is also worth noting that they were able to achieve higher shares of turnover with product innovations despite spending less on innovation. However, their ability to innovate is being held back by obstacles such as a lack of skilled workers or bureaucracy. "SMEs are coming up against administrative and personnel limits when it comes to implementing innovative ideas. In order to strengthen innovative power, measures must be implemented to promote innovation, reduce bureaucratic burdens and secure skilled workers," explains EFI Chairwoman Prof. Irene Bertschek from the ZEW - Leibniz Centre for European Economic Research in Mannheim.
Simplification of the application process for innovation funding required
Entrepreneurial innovation activities are supported by a range of government funding measures. The research allowance introduced in 2020 is particularly popular. "The use of existing funding offers is often associated with a number of bureaucratic requirements that represent a higher hurdle, especially for smaller companies. We therefore need a simplified application process and much simpler and more automated processes for accessing research funding, especially the research allowance," says Prof. Friederike Welter.
Reduce bureaucratic obstacles
"In order to promote innovation activity, especially among SMEs, the federal government should consistently reduce bureaucracy, for example by simplifying administrative and approval procedures," demands Prof. Friederike Welter. The modernization agenda of the federal government and the federal states should be driven forward to this end. Knowledge and practical experience should also be systematically incorporated into regulatory processes in order to make new regulations understandable, comprehensible and practicable. The instrument of practice checks is particularly suitable for this. The once-only principle, i.e. avoiding the repeated submission of data, for example for notification and reporting obligations, leads to a significant reduction in bureaucratic burdens.
Facilitate the immigration of qualified skilled workers
The immigration of qualified skilled workers should be significantly simplified and the corresponding procedures should be accelerated. A central digital platform based on the once-only principle could bundle all procedures for entry, recognition of qualifications and the issuing of residence permits. The "work-and-stay agency" envisaged in the coalition agreement could take on this role. "Without qualified specialists, SMEs cannot realize their innovation potential. A practical design of the work-and-stay agency, regular evaluations and a noticeable reduction in the burden on companies, skilled workers and students are crucial here," says Bertschek.
The report also focuses on the implementation of the High-Tech Agenda Germany, competition and innovation in the German higher education system as well as the development and application of artificial intelligence in Germany and Europe.
Background:
The Commission of Experts for Research and Innovation (EFI), based in Berlin, has been providing scientific policy advice to the Federal Government since 2008 and presents an annual report on research, innovation and Germany's technological performance. The main task of the EFI is to analyze the strengths and weaknesses of the German innovation system in an international and chronological comparison and to evaluate the prospects of Germany as a location for research and innovation. On this basis, the EFI develops proposals for national research and innovation policy.
