The COVID-19 pandemic and the Ukraine war have revealed vulnerabilities in Germany’s economic model: undiversified energy supply, an over-reliance on fossil fuels, delayed digitalisation and disruptable supply chains. Digital technologies may significantly disrupt manufacturing industries Germany has dominated for decades, threatening future competitiveness. The green transition also requires significant industrial transformations. Germany can call upon one of the world’s most advanced innovation systems in dealing with these challenges, but a new more agile and experimental approach to STI policy is needed. This Review outlines how to develop such an approach and what STI policies need to focus on: create markets for future innovations, more significant and more risk-tolerant finance for innovation, inter-disciplinary knowledge exchange, improved data infrastructure and capabilities. Given the internationally shared challenges of dealing with transitions, the insights presented in the review will be of interest to policymakers, stakeholders and analysts from Germany and across the OECD.

Erik Arnold was one of the authors of the new OECD innovation review of Germany, which was published and launched  in Berlin on 3 October.