Decentralized Industrial Policy in Germany. Case Study: Bavaria

Bavaria has achieved a dynamic change in its economic structure since the end of World War II, having evolved in the last four decades from an agricultural to a well-performing modern and service state. A wide variety of R&D-, SME- and infrastructure-oriented industrial policy measures have significantly contributed to the establishment of new small firms and job creation, the modernization of industrial structure as well as the economic and technology development in this German state. Bavarian industrial policy also stresses the subsidiarity principle and the working-together-through-dialogue principle of various groups including government, firms, trade unions, interest groups, etc. This type of loosely defined industrial policy has functioned remarkably well in the Bavarian-specific framework, in which a few large leading firms of international renown, in combination with the strong SME-basis, have played a key role for the rapid development. This study examines some major characteristics of regional industrial policy measures in Germany, taking Bavaria as a successful case.