Germany’s mid-sized companies are both under- and over-rated, writes Martin G Kaspar.

In the late 1990s and early 2000s, Germany was derided as the “sick man of Europe”; today Germany, and particularly the small and medium-sized ‘mittelstand’ companies, are seen as economic superstars and a template for the future.

But was Germany really such an economic failure in the 1990s, and is it as strong today as the business press is suggesting? And is the mittelstand really the revolutionary new path into a glorious future?

Arguably not all that much has changed with mittelstand companies since the 1990s. The fourth generation may have given way to the fifth generation, but essentially the firm is still in family hands, as it has been for well over 100 years. The product portfolio is still relatively narrow, but world class in terms of quality and innovativeness. In order to grow, mittelstand companies still seek to enter international markets rather than dilute their product expertise by expanding into technologies they do not manage to technically dominate. Essentially the business model, the DNA of these firms, has not changed all that much over the years.

What has changed are the macroeconomic conditions we are living in. The late 1990s and early 2000s were a time of rapid growth for most countries in the world. Germany, on the other hand, working through the effects of reunification, was going through a difficult phase. mittelstand companies posted relatively meagre growth rates compared with the figures everyone had grown accustomed to. Today, with a less buoyant global economy, the growth rates of mittelstand companies look positively impressive.

The cautious approach of the mittelstand – focusing on stability and long-term orientation – made them look like dinosaurs in the New Economy age around the millennium. Zero-hour contracts and shareholder value were the buzzwords of the time. A story well told was enough to go public with the most flimsy of ideas. Today, with the world in turmoil, the stability and long-term orientation of the mittelstand seems like an anchor in an ever more unpredictable and choppy world.

So, the next time you read about Germany or the mittelstand, just remember they weren’t as abysmally bad as they were made out to be, nor are they are supremely good as they are painted today. They merely run a different business model than Anglo-Saxon hardcore neoliberal countries. And this invariably produces different outcomes.

Martin G Kaspar is head of business development at a German mittelstand company within the automotive industry. E-mail: martin.georg.kaspar@gmail.com

This article is sourced from fDi Magazine
fDi Magazine

Global greenfield investment trends

Crossborder investment monitor

fDi Markets is the only online database tracking crossborder greenfield investment covering all sectors and countries worldwide. It provides real-time monitoring of investment projects, capital investment and job creation with powerful tools to track and profile companies investing overseas.

Click here to find out more about fDi Markets

Corporate location benchmarking tool

fDi Benchmark is the only online tool to benchmark the competitiveness of countries and cities in over 50 sectors. Its comprehensive location data series covers the main cost and quality competitiveness indicators for over 300 locations around the world.

Click here to find out more about fDi Benchmark

Research report

fDi Intelligence provides customised reports and data research which deliver vital business intelligence to corporations, investment promotion agencies, economic development organisations, consulting firms and research institutions.

Find out more.