Title page
Contents
Preface 4
Acknowledgements 6
Executive summary 9
Introduction 11
1. Structural features of the SME landscape in Germany 13
2. The funding mix of German SMEs 19
3. The federal institutional landscape and policy mix for improving SME access to growth finance in Germany 25
4. Conclusions and considerations for future research 47
References 49
Annex A. Template for mapping scale-up finance policies 54
Annex B. Financing Growth - Key lessons from Phase I of a multi-year research project on Unleashing SME Potential to Scale Up 57
Notes 59
Table 1.1. Almost half of the German economy's value added is produced by SMEs 13
Table 3.1. Schematic overview of what SME scale-up finance policies are and are not 25
Table 3.2. Institutions and selected policies for strengthening scale-up finance in Germany 27
Table 3.3. Financing SME innovation, investment, and network expansion 42
Table 3.4. SME twin transition supported by public action in Germany 44
Figure 1.1. SME business confidence rose at the end of 2022, but uncertainties remain 14
Figure 1.2. Green investments by German micro-businesses have particularly increased in 2021 15
Figure 1.3. The share of SMEs in BERD is particularly low in Germany compared to OECD peers 16
Figure 1.4. German small firms lag in the adoption of advanced ICT tools and activities 17
Figure 1.5. Business dynamism in Germany has slowed markedly 18
Figure 2.1. In Germany, equity capital and bank loans in total SME assets have moved in opposite directions 19
Figure 2.2. Self-funding among the smallest firms is particularly vulnerable to external shocks 20
Figure 2.3. Bank loans remain the instrument of choice for realising growth ambitions, with access being perceived as broadly positive 21
Figure 2.4. Germany lags in seed and later stage venture capital investments 23
Figure 3.1. Innovation is the main focus of institutions implementing 'scale up' finance policies, while climate lags behind 29
Figure 3.2. Ministries or departments are particularly involved in 'scale up' finance policies in Germany, which reflects more centralised governance arrangements... 30
Figure 3.3. Scale-up finance policies in Germany are highly targeted 31
Figure 3.4. Germany places a stronger focus on start-ups than most other OECD countries 32
Figure 3.5. Innovation is the predominant driver leveraged in the German scale-up finance policy mix 36
Figure 3.6. Policies mainly support traditional innovation channels, with a focus on the domestic market 37
Figure 3.7. Germany relies heavily on the 'scale up' finance market to support SME growth through innovation and investment 38
Figure 3.8. In Germany, public efforts rely mainly on the financial sector and VC/PE firms to improve the functioning of the 'scale up' finance market 40
Figure 3.9. The use of equity and hybrid instruments is much more developed in Germany than in other OECD countries to support SME access to 'scale up' finance 41
Figure 3.10. Financial support provided directly to German SMEs often takes the form of non-repayable funds 42
Figure 3.11. Germany's Fintech sector and Greentech companies are particularly attractive for equity investors 46
Boxes
Box 3.1. Scale-up finance cutting across multiple policy domains 25
Box 3.2. Financial support for firms at sub-national level in Germany 30
Box 3.3. Korea's double focus on start-ups and high-growth firms 33
Box 3.4. Selected country examples of initiatives to improve access to scale-up finance among established firms 33
Box 3.5. Canada - One-stop shop of integrated public services for scale up financing 35
Box 3.6. The European Tech Champions Initiative (ETCI) 38
Box 3.7. Equity and growth financing are driving the success of Germany's Fintech sector, including its Greentech companies 46
Annex Tables
Table A A.1. Template for mapping scale-up finance policies 54
Annex Figures
Figure A B.1. Synthetic overview of SME performance and scaling up drivers 58