Internationalisation of German SME sector

Many German SMEs sell their products and services in other countries. In 2016 they generated turnover of some EUR 547 billion outside Germany, more than two thirds of it in Europe. Most small and medium-sized enterprises focus on a few target markets in nearby countries, not least because of the high transport costs.

German SMEs spend around one in ten euros earned abroad – nearly EUR 50 billion in 2016 – on transport costs and tariffs, analysing and developing international markets, necessary product adaptations and other additional costs of international trade. New bilateral and multilateral free-trade agreements as well as investment in infrastructure could reduce these costs significantly.

The world is not a village – geographic proximity to export markets is crucial to SMEs(PDF, 155 KB, non-accessible)

Unlike exports, foreign direct investment is a form of internationalisation that German SMEs have hardly used so far. Fewer than 4 % of SMEs in Germany invested abroad in the period 2012–2015. The relatively high risk of investing abroad is one reason for this. It is also a reason why those SMEs which do invest abroad mostly employ their own resources and hardly use bank loans to fund their project. From the perspective of the investing SMEs, however, this risk is worth taking as they can expect their international turnover to grow at above-average rates.

The happy few: German SMEs investing abroad(PDF, 121 KB, non-accessible)