Trentino plus 10 Foresight Workshop July 2003 (Trento) Financing and organising applied research in Germany - the model of Fraunhofer Society PD Dr. Knut Koschatzky Fraunhofer Institute for Systems and Innovation Research

Trentino plus 10 Foresight Workshop July 2003 (Trento) Fraunhofer Society at a glance Fraunhofer Society was founded in 1949 in Munich as non-profit organisation FhG is the leading organisation for institutes of applied research in Germany and Europe At present, there are about 80 research establishments of 57 institutes at 40 locations throughout Germany Staff size is about , the majority of whom are qualified scientists and engineers Annual research volume is over 1 billion euro Contract research is financed by a share of 37 % basic funding, 33 % contract financing (industry) and 30 % public financing acquired in competition (Germany, EU, other countries)

Trentino plus 10 Foresight Workshop July 2003 (Trento) Development of Fraunhofer Society Institutes Budget Number of institutes

Trentino plus 10 Foresight Workshop July 2003 (Trento) Profile of Fraunhofer Society in 2002

Trentino plus 10 Foresight Workshop July 2003 (Trento) Research fields

Trentino plus 10 Foresight Workshop July 2003 (Trento) Corporate governance at Fraunhofer Society

Trentino plus 10 Foresight Workshop July 2003 (Trento) The German research landscape 2001

Trentino plus 10 Foresight Workshop July 2003 (Trento) Market for industrial research and development in Germany

Trentino plus 10 Foresight Workshop July 2003 (Trento) Financing of Fraunhofer Society Basic funding Public financing (German, EU, others) Contract financing (industry) 63 %

Trentino plus 10 Foresight Workshop July 2003 (Trento) International orientation of Fraunhofer Society International proceeds

Trentino plus 10 Foresight Workshop July 2003 (Trento) Basic funding of Fraunhofer Society Share of 90:10 between federal government and federal states with seats of Fraunhofer institutes Success-based Annual negotiations between Fraunhofer Society (board of directors) and sponsors (Fraunhofer commission) Basic funding is obtained by Fraunhofer Society, i.e. the board of directors. Distribution among institutes is in the autonomy of the Society. No external control (= success-based self control) Public principles have to be followed

Trentino plus 10 Foresight Workshop July 2003 (Trento) Distribution of allocations to the institutes (model) 58 % standard basic funding composed of G1 = 10 % fixed amount G2 = 24 % 10% of institute’s budget G3 = 23 % depending on share of industrial financing G4 = 1 % depending on EU contributions 14 % special allocation due to GMD integration 15 % internal programmes 13 % specific measures (e.g. strategic investments) But: Not all institutes profit to the same amount from the internal distribution model

Trentino plus 10 Foresight Workshop July 2003 (Trento) Budget of Fraunhofer ISI 135 permanent staff (103 posts) of whom 80 are scientists and 15 preparing PhD. thesis Personnel costs (ISI)6,6 Mill. € Personnel costs (others)1,5 Mill. € Material costs2,9 Mill. € of which are external R&D1,2 Mill. € Contribution (central services)0,7 Mill. € Total operating expenses 11,7 Mill. € Own proceeds9,7 Mill. € Basic funding2,5 Mill. € Total proceeds 11,7 Mill. € Building funds0,2 Mill. € regular investments0,5 Mill. € 61 % federal ministries 17 % enterprises and trade associations 11 % EU 11 % research promotion organisations Average share of basic funding for : 22,5 % Average for all Fraunhofer institutes: 28,1 %

Trentino plus 10 Foresight Workshop July 2003 (Trento) Some important basics All institutes are legally dependent bodies Fraunhofer headquarter in Munich is a service center for all institutes. The institutes have to pay for these services (by an annual contribution) Institutes are free in organising their internal organisation (departments, cost centres, distribution of basic funding); there is a large variety of organisation models Funding of the institutes is success related: the higher the absolute contract volume, the higher is the absolute sum of basic funding Basic funding can be increased by high shares of industrial proceeds or EU contributions

Trentino plus 10 Foresight Workshop July 2003 (Trento) Some important basics The price an institute charges for a working hour depends on the cost structure of the institute. Overheads thus vary according to personnel and infrastructure costs. Full cost calculation is applied Institutes can make losses, but only for a few years. When the financial situation does not improve, the institute will be re-organised or closed Positive proceeds can be carried forward to the next year; they remain in the institute’s budget Due to a fixed limit of personnel capacities, the flexibility of the institutes is limited (unless a Fraunhofer institute is closely associated with a university institute where a free flow of people is possible)

Trentino plus 10 Foresight Workshop July 2003 (Trento) Some important basics Working contracts are usually temporally limited. Only % of the employees have a permanent contract Although market oriented, Fraunhofer has to apply public laws, regulations and payment schemes. This limits the attractivity of jobs with regard to Fraunhofer’s major competitor on the labour market: industry