Why German SMEs Struggle to Innovate—and How Outside Help Changes the Game

A new study underscores why many small and medium-sized firms struggle to innovate effectively. Research suggests that deep-rooted habits and behavioral biases often prevent these businesses from adopting competitive strategies. Yet, some have found success by turning to external creative services for support.

The findings build on a 2012 report by the German Federal Ministry for Economic Affairs and Energy (BMWi). It revealed that around 15% of German SMEs—roughly 150,000 to 200,000 companies—had used external innovation services since 2009. At the time, Germany had about 1.3 million small and medium-sized enterprises in total.

The latest research argues that these services, often provided by creative firms, can help businesses overcome ingrained habits. By addressing behavioral failures, external expertise may improve a company's ability to innovate. The report suggests that such support could be key for firms looking to stay competitive.

The study underscores a clear pattern: many SMEs face internal barriers to innovation. Those that seek outside help, however, appear better positioned to enhance their performance. With only a small fraction currently using these services, the findings point to untapped potential for growth in the sector.