Demographic Change and Industry-specific Innovation Patterns in Germany

Technological progress is the key determinant of economic growth in advanced economies. It consists of innovations and the knowledge needed to use them in production (Romer 1986, 1987). Innovations emerge from spontaneous or trained creativity, coupled with purposeful investment (R&D) and job practice (learning-by-doing, Arrow 1962); they are thus based on knowledge and are producing new knowledge. People have different intellectual and institutional access to knowledge. The former refers to cognitive and motivational capacity; the latter encompasses access to (high-quality) schooling as well as to job practice and leading-edge technologies. Both result in heterogeneity of “human capital”, defined as a worker's, firm's or nation's stock of embodied knowledge and economically useful skills. In the process of human capital accumulation, innate abilities reduce the cost of education and training in terms of own efforts and are believed to contribute to the development of talent. In Germany, talents or “high potentials” and generally “excellence” are currently considered particularly important for innovation and economic growth. This is in line with Southern et al. (1993) who note that: “When a nation feels that its standard of living is threatened efforts to provide universal access [to education] may be traded off in favor of exploiting talent” (p. 401).