For years doubts have grown about the international competitiveness of German industry. Sectors such as photovoltaics, where Germany once led, have shifted to East Asia. The famed automotive industry is also losing ground, notably against China. Yet some German firms remain global leaders: SAP in software, Deutsche Telekom in telecommunications and DHL in logistics and express shipping.
Germany still ranks among the world’s top five economies, even as growth forecasts are repeatedly cut. This standing isn’t only due to a few large names but owes much to a dense fabric of small and midsize enterprises (SMEs).
Over 99% of companies in Germany are SMEs, and about half of net value added comes from that sector, says Bastian Pophal of the CDU-affiliated Mittelstands- und Wirtschaftsunion. These “hidden champions” — firms that are world leaders in narrow niches — play a decisive role in global value chains. Zeiss, a specialist in optics and optoelectronics, shows that firms need not be enormous to be essential suppliers.
Experts credit the Mittelstand’s strengths to several factors: a globally unique dual vocational training system, deep technical expertise, high quality and reliability, and remarkable adaptability. Crucially, many midsize firms think long-term, act responsibly and remain close to customers and employees — a central competitive edge, says Maximilian Flaig of the German Mittelstand Association.
Company leaders echo those points. Martin Herrenknecht, founder of the tunnel-boring machine maker Herrenknecht AG, highlights high innovation, industrial know-how, quality and reliability. He emphasizes close customer relationships: midsize firms can respond directly and quickly, sometimes solving problems on site at short notice. Ottobock, a global leader in prosthetics, points to solid training, strong innovation and rapid adaptation to differing markets and regulations.
Many German innovations have been internationally successful — for example MP3 or magnetic levitation trains — yet profits and subsequent development have sometimes migrated abroad. Still, the Mittelstand’s stable regional networks, long-term strategies and resilience give experts confidence that these firms can withstand international pressure.
Leaders also warn that political action is needed. As costs rise and the wider economy struggles, firms call for comprehensive structural reforms: accelerated investment in infrastructure — rail, roads and digitalization — competitive energy prices, stable and resilient supply chains, and investment security. If these conditions are met, midsize firms should retain long-term international prospects.
Maintaining high innovation speed and adaptability will be crucial for the Mittelstand to remain competitive globally.
This article was originally written in German.