Concerns about the competitive edge of German industry have grown in recent years. Entire sectors that once led globally, such as photovoltaics, have shifted to East Asia, and Germany’s celebrated carmakers face mounting pressure from Chinese rivals. Still, a number of high-profile firms — SAP in software, Deutsche Telekom in telecoms and DHL in logistics — remain world leaders.
Germany’s place among the top five global economies today rests not only on a few large names but on a dense network of small and medium-sized enterprises (SMEs). More than 99 percent of companies in Germany are classed as SMEs, and roughly half of the country’s net value added comes from them, according to Bastian Pophal of the CDU-affiliated Mittelstands- und Wirtschaftsunion. Many of these so-called “hidden champions” dominate narrow global niches and are indispensable links in international value chains. Companies like Zeiss, specialists in optics and optoelectronics, illustrate that essential suppliers need not be huge.
Experts point to several interlinked strengths behind the Mittelstand’s success: a unique dual vocational training system, deep technical know-how, consistently high quality and reliability, and an ability to adapt quickly. Crucially, many midsize firms pursue long-term strategies, take responsibility for employees and communities, and stay close to customers — a combination that gives them a durable competitive edge, says Maximilian Flaig of the German Mittelstand Association.
Business leaders echo these qualities. Martin Herrenknecht, founder of tunnel-boring specialist Herrenknecht AG, cites strong innovation, industrial expertise and the ability to respond fast to customer needs, sometimes solving problems on site at short notice. Ottobock, a global leader in prosthetics, highlights robust training programs, continuous innovation and agility in navigating diverse markets and regulations.
Germany has produced internationally influential innovations — from the MP3 format to magnetic-levitation trains — but commercialization and profit have sometimes shifted offshore. Even so, the Mittelstand’s regional ties, family ownership structures, and emphasis on steady long-term investment make many observers confident these firms can withstand external competitive pressures.
At the same time, leaders warn that policy choices matter. Rising costs and a sluggish broader economy have increased calls for structural reforms: faster public and private investment in infrastructure (rail, roads and digital networks), competitive and predictable energy pricing, more resilient supply chains and clear investment frameworks. If policymakers deliver these conditions, midsize firms should be well placed to maintain their international roles.
Maintaining a high pace of innovation and continued adaptability will be key for the Mittelstand to remain globally competitive in the years ahead.
This article was originally written in German.