The German Mittelstand

German Mittelstand needs more company founders

In the public perception, German Mittelstand consists of two categories mid- to large-size companies, and large ones. This is an overly restrictive definition, however. The  Institute for Mittelstandsforschung in Bonn has announced that the fundamental requirements for belonging to the category of Mittelstand  are an overlap of ownership and management, and company independence. This makes all manufacturers of traditional arts and crafts, family-run businesses, the professions and the many companies in start-up mode all Mittelstand companies.

The new creative and innovative companies  are especially important for the development of the category, a point also emphasised by Dr. Jörg Zeuner, head economist with the KfW banking group. During the “Gründermonitor 2014” presentation he argued that company founders mainly turn up with innovative technologies which can be used as the driving power for continual innovation, necessary for the economy.  The 12 percent increase in newly established companies in  2013 is, therefore, a very positive result.

A closer look at the numbers in the report on new companies, however, changes the perspective slightly. Indeed growth mainly affects second jobs that are seen to have increased by 22 percent.  Founders of enterprises that are instead full-time jobs and which, therefore create employment, are rather more thin on the ground – indeed there are 3 percent fewer of them.  Despite the increase in employees hired by full-time start-ups, the decrease in absolute terms of establishing new companies that provide full-time employment is due to the economic difficulties of 2013.

The German Mittelstand is in urgent need of new companies. In the long term, the process of economic selection increases the chance that an embryonic start-up will develop into a great and/or successful company. The easier economic climate of 2014 is already laying the foundations – attempts to set up a company in times of economic hardship are beset by the lack of prospects of employment while in a milder economic climate new companies are more likely to be founded by entrepreneurs who perceive real opportunities for marketing their business idea.