Baden-Württemberg, one of 16 German federal states, has accumulated the second most greenfield FDI projects in Germany since 2003 – beaten only by Bavaria, according to greenfield investment monitor fDi Markets. Indeed, the two southern German states of Baden-Württemberg and larger rival Bavaria (which borders it to the east), and especially their respective capitals, Stuttgart and Munich, often compete for investment from international companies.

Since 2014, Baden-Württemberg has attracted more greenfield FDI projects than any other state within the R&D business activity, although its 10 projects only topped Bavaria by one, according to fDi Markets. When this period is extended to since fDi Markets records began in 2003, however, Baden-Württemberg ranks third behind North Rhine-Westphalia and Bavaria in terms of R&D activity projects. 

Advertisement

R&D spending

By other measures, Baden-Württemberg excels in innovation and R&D activity. For instance, the state’s share of R&D expenditure relative to GDP amounted to 5.64% in 2017, higher than any other German state that year, according to figures from the Federal Statistics Office. While Bavaria accounted for 31.9% versus Baden-Württemberg’s 31.3% of patent applications made across Germany in 2018, the latter boasted the highest number of patent applications per 100,000 inhabitants, at 133 compared with the German average of 56, according to the German Patent and Trade Mark Office Annual Report 2018.

With criticism circulating around the lack of digital infrastructure investment and development in Germany, especially in rural areas, Baden-Württemberg launched a multi-disciplinary digitalisation strategy called digital@bw at the end of 2016, which earmarked €1bn of investment by 2021, from which more than €122m was invested in about 540 broadband projects in 2018.

Given the state’s commitment to digitalisation and an evidential strong innovation landscape, it is no surprise it hosts several developed ecosystems supported by various academic institutions. Out of the 12 hubs within the nationwide Digital Hub Initiative – a network of innovation centres focused on various areas, funded and set up by the Federal Ministry of Economic Affairs and Energy in 2017 – three are located in Baden-Württemberg: the future industries hub in Stuttgart; the digital chemistry and health hub in Mannheim; and the artificial intelligence (AI) hub in Karlsruhe.

Growing popularity

“There is a great ecosystem in Baden-Württemberg, which is unique given the university and education system, as you can find really skilled people in the area at a certain price. My personal impression is that it is becoming more popular to set up R&D centres [here],” says Beate Ando, regional manager at economic development agency Baden-Württemberg International.

One new ecosystem is Cyber Valley, an AI cluster collaboration network founded in 2016 and funded by the state of Baden-Württemberg, which brings together companies and academic institutes in the Stuttgart-Tübingen area. Partnering with major corporations such as Amazon, Daimler and Bosch alongside the Max Planck Institute for Intelligent Systems, the Cyber Valley is working to be at the forefront of machine learning and AI development.

Taken together, this developed ecosystem and continued innovation means that despite relatively high labour costs, Baden-Württemberg is likely to maintain its attractiveness as an R&D location.