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The German Mittelstand: antithesis to Silicon Valley entrepreneurship?

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Abstract

While internationally, the Mittelstand in Germany is admired and many countries try to emulate it, the current debate in Germany praises the Silicon Valley model of entrepreneurship, contrasting the Mittelstand as low growth, low-tech and non-innovative—in short, as a hindrance to Germany’s economic future. We therefore ask whether the Mittelstand actually is the antithesis to Silicon Valley entrepreneurship. We show that Mittelstand is about more than just small and medium enterprise size, identifying as its distinctive features the identity of ownership and management and a sense of belonging. In this regard, we also discuss the influence of historical paths and current institutional settings of the Mittelstand. Asking to what extent the Mittelstand is distinctive, we address its diverse contributions to economy and society. We suggest that the Mittelstand is an excellent example of everyday entrepreneurship and a vibrant segment of the economy which is also competitive, innovative, and growth-oriented, albeit in different ways compared to Silicon Valley entrepreneurship. In conclusion, we outline ideas for future research and implications for policymakers. In our view, future research and policies should stand back from dichotomies such as “Mittelstand versus Silicon Valley entrepreneurship” and acknowledge the vibrant diversity and heterogeneity of entrepreneurship.

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Notes

  1. For the survey, a stratified random sample of 14,397 enterprises was drawn from Creditreform’s largest database covering about 3.5 million German firms. The stratification of the sample is based on industry affiliation and total annual sales. The response rate was 3.8%.

  2. von Saldern (1992: p. 28) explains that the term “Old Mittelstand” was commonly used in the nineteenth century. It included small shopkeepers, self-employed artisans, and owners of small businesses, sometimes also farmers.”

  3. See Welter et al. (2016) for a detailed discussion on the importance of the Soziale Marktwirtschaft for the German Mittelstand.

  4. To list but a few of the early studies: Acs and Audretsch (1993); Audretsch and Elston (1997); Leicht and Stockmann (1993); Schwalbach (1989); Wagner (1994).

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  1. Institut für Mittelstandsforschung (IfM) Bonn, Maximilianstrasse 20, 53111, Bonn, Germany

    André Pahnke & Friederike Welter

  2. University of Siegen, Siegen, Germany

    Friederike Welter

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  1. André Pahnke
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Pahnke, A., Welter, F. The German Mittelstand: antithesis to Silicon Valley entrepreneurship?. Small Bus Econ 52, 345–358 (2019). https://doi.org/10.1007/s11187-018-0095-4

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