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The German Mittelstand - Antithesis to Silicon Valley entrepreneurship?

DOI:10.1007/s11187-018-0095-4
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Andre Pahnke at Institut für Mittelstandsforschung Bonn
Andre Pahnke
Friederike Welter at Institut für Mittelstandsforschung Bonn
Friederike Welter
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The German Mittelstand - Antithesis to Silicon Valley entrepreneurship?

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Abstract and Figures

Whilst internationally, the Mittelstand in Germany is admired and many countries try to emu-late 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 hin-drance to Germany’s economic future. We therefore ask whether the Mittelstand actually is the antithesis to Silicon Valley entrepreneurship. We show that Mittelstand is more 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 entrepre-neurship 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 concluding, 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 heteroge-neity of entrepreneurship.
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The German Mittelstand: antithesis to Silicon Valley
entrepreneurship?
André Pahnke &Friederike Welter
Accepted: 16 August 2018 /Published online: 13 September 2018
#Springer Science+Business Media, LLC, part of Springer Nature 2018
Abstract While internationally, the Mittelstand in
Germany is admired and many countries try to em-
ulate it, the current debate in Germany praises the
Silicon Valley model of entrepreneurship, contrast-
ing 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 medi-
um enterprise size, identifying as its distinctive fea-
tures the identity of ownership and management and
a sense of belonging. In this regard, we also discuss
the influence of historical paths and current institu-
tional settings of the Mittelstand.Askingtowhat
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, innova-
tive, and growth-oriented, albeit in different ways
compared to Silicon Valley entrepreneurship. In con-
clusion, we outline ideas for future research and
implications for policymakers. In our view, future
research and policies should stand back from dichot-
omies such as “Mittelstand versus Silicon Valley
entrepreneurship”and acknowledge the vibrant di-
versity and heterogeneity of entrepreneurship.
Keywords Mittelstand .Context .Everyday
entrepreneurship
JEL classifications L26 .M13
1 Internationally praised, nationally doomed?
“Le Mittelstand—France’s blind spot”(Walter and Mey
2017), “Can the ‘Brittelstand’rival Germany?”(Ellyat
2014), “Why ‘Mittelstand’is important for Korea”(Da-
ye 2013)—not only the French, British, and Korean
governments, many more officials around the world
are interested in understanding Germany’s“secret weap-
on,”itsMittelstand (Ross Range 2012), while aca-
demics are analyzing how to support similar success
models in their own countries (Logue et al. 2015).
However, despite its international attention and praise,
the discussion in Germany has recently settled on the
perceived backwardness of the Mittelstand.Thisisfired
by reports and headlines that refer to continuing and
statistically observable declines in the number of inno-
vators (Zimmermann 2017) that call attention to the
seemingly dying species of entrepreneurs (DIHK
2013), a steadily decreasing number of new businesses
(DIHK 2017), and, in international comparison,
Small Bus Econ (2019) 52:345–358
https://doi.org/10.1007/s11187-018-0095-4
A. Pahnke (*):F. Wel ter
Institut für Mittelstandsforschung (IfM) Bonn, Maximilianstrasse
20, 5 3111 Bonn, Germany
e-mail: pahnke@ifm-bonn.org
F. Wel t er
University of Siegen, Siegen, Germany
e-mail: welter@uni-siegen.de
Content courtesy of Springer Nature, terms of use apply. Rights reserved.
... Such research can instigate meaningful policy debates about institutional change and complementarities within a specific context (Caliendo, Kunn & Weissenberger, 2020;Hipp, Bernhardt & Allmendinger, 2015;Valdez & Richardson, 2013). Entrepreneurship scholars are also being increasingly asked to widen their perspective (Economidou, Grilli, Henrekson & Sanders, 2018;Pahnke & Welter, 2019;Zahra, Wright & Abdelgawad, 2014;Zahra & Wright, 2016), juxtapose theoretical modelling with reality (Fayolle, Landstrom, Gartner & Berglund, 2016;Su, Zhai & Karlsson, 2017) and provide more systematic, policy-relevant research (Audretsch, Colombelli, Grilli, Minola & Rasmussen, 2020;Block, Fisch & van Praag, 2017). Policymakers and researchers are encouraged to consider social implications of macroeconomic policies due to rising inequalities, especially within Europe (Istituto per la Ricerca Sociale, 2016;OECD & European Union, 2017). ...
... Consequently, some measures of entrepreneurship only focus on innovation and growth, suggesting that these ventures represent "real" entrepreneurship and include only billionaires such as Bill Gates (Henrekson & Sanandaji, 2018). Taking this approach produces a bias for greater attention towards and investment in highly visible technology firms and activities in the more obvious regions, like bigger cities (McCann & Ortega-Argilés, 2015; Pahnke & Welter, 2019). ...
... Campbell & Mitchell (2012) draws attention to the example of an innovative use of a legal laws and loopholes that allow an individual to profit but at a cost to competitors and customers. Instead, attention could be better placed on the many hidden champions, who though market leaders, are largely unknown but contribute significantly to economic and social prosperity by creating jobs and maintaining sustainable ventures (Lehmann, Schenkenhofer & Wirsching, 2019;Pahnke & Welter, 2019). In their extensive review of innovative entrepreneurship, Block et al. (2017) recommends that focusing on the number and quality of jobs created can better identify productive entrepreneurship. ...
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Thesis
Full-text available
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Entrepreneurship has the potential to drive economic development and social advancement. The European Commission implemented entrepreneurship policy as a pragmatic response to its economic and social challenges, especially after the 2008 financial crisis. Institutional changes to promote entrepreneurship and enable individuals to directly contribute to economic growth, job creation and society were introduced to create an entrepreneurial Europe. This study undertakes a systematic review to examine the implications of entrepreneurship policy within Europe. Examining and understanding the impacts of entrepreneurship policy and institutional changes are particularly relevant because of the billions of Euros invested and the impacts on the working lives of European citizens. By examining a broad range of existing literature, the study finds that the entrepreneurial Europe envisioned by policymakers has not been fully realised. Instead, entrepreneurship activity has skewed towards poor quality, necessity entrepreneurship. The European institutional context has also shifted away from the social model on which it was founded, increasing the exposure of European workers to social risks. To promote sustainable growth, wellbeing and well-functioning labour markets, researchers and policymakers are reconsidering the role of social protection. Social protection also has the potential to promote quality entrepreneurship. Based on the review of literature, seven testable propositions about how social protection can promote quality entrepreneurship have been developed for future empirical testing. This study advances knowledge in entrepreneurship research and contributes to debates in policymaking and practice. It also provides a sound basis for subsequent empirical research. https://jyx.jyu.fi/handle/123456789/75105
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