The Success Stories

The Guardian: How Bavaria became a European silicon valley

tranditional dancers
The Guardian - Joerg Koch/AFP/Getty Images

Excerpts from an article by Julia Kollewe, The Guardian, 15 March 2011

The region is home to hundreds of biotech, IT and environmental technology firms that have emerged in the past 20 years

The mention of Bavaria may still conjure up images of rowdy beer halls, oompah bands and red-cheeked folk in Dirndl and Lederhosen, but the state capital, Munich, is revamping itself as Germany's answer to Silicon Valley. The Southern German state – the country's most prosperous together with its neighbour, Baden-Württemberg – has tried hard to shed its buttoned-up image. Historically an agricultural region that lacked natural resources, its transformation into a more hi-tech economy began after the WWII.

That doesn't mean Bavarians have given up their traditions. Michael Hinterdobler, Director of International Relations at the State Chancellery, says both Bavarias are thriving: "There has been a renaissance. Young people go out with their iPod but also have a Dirndl at home. It's not a contradiction any more."

Post-war Bavaria benefited from being under American occupation, and companies such as Siemens relocated from Berlin to Munich.The region around the State capital, which generates a third of Bavaria's total output, is home to heavyweights such as BMW and MAN, but also hundreds of smaller biotech, IT and environmental technology firms that have sprung up in the past couple of decades, as well as 550 US IT firms. (...)

It hasn't all been plain sailing. Having built up a reputation for electronics and advanced manufacturing in the postwar years, Munich found its competitive position under threat in the mid-1990s. It was hit by a double whammy of the 1993-94 recession, which knocked its export-oriented industries, and a drop in demand for defence and aerospace, one of the region's strengths, as the Cold War came to an end.

The State of Bavaria came to the rescue, selling €2.9bn of shares in government-owned energy and infrastructure companies and pumping the bulk of it into initiatives to nurture hi-tech industries. Bayern Kapital, a subsidiary of LfA Förderbank Bayern, Bavaria's State bank, was established with €75m in state money to provide venture capital for start-ups, especially in the risky hi-tech sectors.

A factor in Bavaria’s success is a close-knit network of 13 universities and a plethora of public research organisations such as the Fraunhofer and Max Planck institutes. Academics at the London School of Economics laud Munich as a model of "institutional thickness". "Money was put into universities, technical colleges and institutes of applied science, there was always a network," said Martin Zeil, Bavaria's deputy prime minister and minister for economic affairs, "What attracts foreign investors is this network."

More than 55,000 people work in research and development in and around Munich. For over two decades, Munich has had Germany's highest share of technology patents by population.

Max Nathan, a research fellow at LSE Cities, who co-wrote a paper on Munich published last December, has found many parallels between Munich and California's Bay area. "Over the past 60 years, both have shifted from mainly rural communities to hi-tech hubs. Both offer a strong economy and an excellent quality of life – something that's helped keep people in the area," he wrote.

Read more: The Guardian.co.uk