Mittelstand Firms Research Articles

The importance of owner-managed SMEs and regional apprenticeship activity: evidence from the German Mittelstand

BackgroundPoliticians frequently emphasize the importance of Mittelstand firms for the economy, thereby particularly referring to their enormous engagement in training apprentices. This view is especially prevailing in Germany, leading to political promotion of Mittelstand firms on the regional and the national level. However, due to data availability, there is yet almost no empirical evidence on the question whether Mittelstand firms are in fact excessively active in training apprentices. This paper aims at filling this gap in the empirical literature by using a firm dataset from Creditreform.MethodsCombining information from Creditreform with regional data of West German counties, we study whether the relative importance of owner-managed small and medium sized enterprises has an effect on firms’ apprenticeship activity.Results and ConclusionsWe thereby find a significantly positive relation between the relative importance of Mittelstand firms and apprenticeship activity on the regional level. However, on the national level an increase in the share of Mittelstand firms turns out to be without effect on apprenticeship activity.

Innovation with Limited Resources: Management Lessons from theGermanMittelstand

German Mittelstand firms are globally recognized for their innovation, especially regarding product, process, and service innovation. So what can scholars and managers across the globe learn from the success story of German Mittelstand innovation? Drawing on information collected on innovative Mittelstand firms and extant knowledge on innovation, the resource‐based view, and family firm research, the authors investigate how these highly innovative firms flourish and achieve high innovation performance despite the severe financial and human capital resource constraints they face as compared with larger corporations. The authors then present a model identifying and integrating six salient traits of such firms that allow them to efficiently orchestrate their resources to innovate and outcompete their competitors in the global market, enabling those firms to overcome their resource‐related weaknesses and turn them into strengths. Specifically, these traits are: niche focus and customer collaboration, globalization strategy, preference for self‐financing, long‐run mindset, superior employee relations, and community embeddedness. The power of this Mittelstand approach takes full effect only when all six traits operate in an integrated fashion, and the proposed resource‐based model serves as a starting point for a more holistic and comprehensive understanding of firm ability to innovate and successfully compete within a specific context. The article outlines the implications of the model of German Mittelstand innovation for research conducted in different fields including innovation, entrepreneurship, strategy, dynamic capabilities, ecosystems, and family business. Finally, the article proposes a future research agenda aimed at improving current understanding of the German Mittelstand “innovation strategy” and its transferability to other contexts, and outlines practical implications for owners and managers worldwide wanting to emulate the German Mittelstand innovation model.

Supply chain management practices and intellectual property protection in China

Purpose– The purpose of this paper is to investigate the strategy used by German Mittelstand companies to achieve a profitable business in China. It explores how those firms seek to reduce their risk of entry into this market.Design/methodology/approach– Survey data were gathered over the phone from individuals in the companies who were identified as knowledgeable contacts. Their responses were then analyzed using descriptive statistics and structural equation modeling.Findings– German Mittelstand firms that hire Chinese nationals in China obtain market knowledge and a higher return on investment than others. German managers’ efforts to understand the Chinese cultural norms increased the firm’s unwillingness to share information with others. This was probably because their concern about protecting their competitive secrets increased, so they shared less information with suppliers, which decreased their return on investment.Research limitations/implications– First, the small sample size limited the analysis. Second, there was low inter-rater reliability on multiple items, so these responses could not be analyzed. There is a need to further validate the survey, and obtain a larger sample to analyze alternative models.Practical implications– This suggests to the practitioner that while it may be relatively easy to start a manufacturing business in China, it requires great effort to manage their risk of losing corporate secrets to their competitors in China.Originality/value– This paper provides a unique set of data from practicing managers about the risks and gains from doing business in China. This data can be of use to both researchers and to practitioners and it provides a foundation to examine how the risk of losing proprietary knowledge to Chinese competitors affects business.

Regional Importance of Mittelstand Firms and Innovation Performance

Berlemann M. and Jahn V. Regional importance of Mittelstand firms and innovation performance, Regional Studies. Despite the deeply rooted belief of politicians all over the world about the important role of Mittelstand firms, there has yet been surprisingly little empirical research on this issue. This article contributes to the literature by studying whether the relative regional importance of Mittelstand firms has an effect on regional innovation performance. Using a cross-section of German NUTS-3 regions, a significantly positive relation between the relative importance of owner-managed small and medium-sized enterprises and patent applications is identified. This finding is highly robust when controlling for spatial correlations as they often occur in highly disaggregated regional analyses.

The End of Family Business? The Mittelstand and German Capitalism in Transition, 1949–2000

TheMittelstandsector of the German economy, which is made up of small and medium-sized family firms, is generally not mentioned in debates about German capitalism. This article makes the case that the focus of research on the German economy should shift from large corporate structures to these smaller firms. The classic Mittelstand model, which dominated the economy until about 1970, was characterized by identity of ownership and management, strong emotional investment by owners and staff, and an emphasis on continuity, paternalism, and independence. Beginning in the 1960s, this model was undermined by fundamental changes in the country's economic and sociocultural environment. In response, the firms abandoned a number of their traditional attributes, a process that led to the demise of some businesses and the regeneration of others. Although the modern form adopted by the surviving Mittelstand firms allows them to be less dependent on individual families, to enjoy more access to external capital, and to display more openness and international orientation, they can no longer rely on the prospect of long-term stability, as they did in the past.

The End of Family Business? The Mittelstand and German Capitalism in Transition, 1949–2000

TheMittelstandsector of the German economy, which is made up of small and medium-sized family firms, is generally not mentioned in debates about German capitalism. This article makes the case that the focus of research on the German economy should shift from large corporate structures to these smaller firms. The classic Mittelstand model, which dominated the economy until about 1970, was characterized by identity of ownership and management, strong emotional investment by owners and staff, and an emphasis on continuity, paternalism, and independence. Beginning in the 1960s, this model was undermined by fundamental changes in the country's economic and sociocultural environment. In response, the firms abandoned a number of their traditional attributes, a process that led to the demise of some businesses and the regeneration of others. Although the modern form adopted by the surviving Mittelstand firms allows them to be less dependent on individual families, to enjoy more access to external capital, and to display more openness and international orientation, they can no longer rely on the prospect of long-term stability, as they did in the past.

Cautious international entrepreneurs: The case of the Mittelstand

This paper investigates the international entrepreneurial behaviour of Mittelstand firms (German small and medium sized enterprises). Analysis of a survey of the international marketing strategies of Mittelstand firms revealed three clusters of firms, two that had below and one above average international activities. None of the clusters displayed ‘born global’ type of internationalisation processes. However, this does not mean that they adopt passive approaches to internationalisation. The results suggest that Mittelstand firms engage in entrepreneurial behaviour that is proactive and innovative but which is cautious, sequential, and risk adverse. The implications of this analysis for future research in the area of international entrepreneurship are considered.