19 April 2012

German Mittelstand: One of a Kind?

Above is feature from The Economist on Germany's Mittelstand manufacturing companies. It accompanies a valuable briefing on Germany's economy. Here is an excerpt:
Many Mittelstand firms are oligopolists, argues Mr Schmiedeberg, occupying niches so narrow that they attract few rivals. Increasingly, the niches are being defended with services, in this context not the term of derision it often is in manufacturing circles. Beckhoff builds its own sales and maintenance networks, relying little on dealers—unlike some of its non-German competitors.

The next stage is “hybrid value-added”, in which the product is an outcome that the customer wants rather than the good that produces it. Wolf Heiztechnik of Bavaria is developing a contract under which it sells temperature control rather than heating equipment. “Every Chinese firm can do the industrial part, not the whole hybrid,” says Karl Lichtblau of IW Consult, a consultancy. Counting industry-related services, he reckons, manufacturing’s share of GDP is more like 30% than 20%.
The German experience, The Economist argues, may not be exportable. The whole briefing is worth a read.


  1. I've corresponded in the past with your father regarding climate analysis, but I believe this is the first time I've commented on your blog.

    I ran across this same article, but made a slightly different connection: Germany has preserved its skilled manufacturing system whereas our government has encouraged a more academic approach with the unintended consequences that our skilled manufacturing system has suffered somewhat.


  2. The industrial mid-west used to be full of such firms serving larger companies until the US manufacturing base eliminated the infrastructure. What remains are small high tech companies particularly in California. See for example Fallows and Krugman on this issue

    Some of these companies, of course, are still around, competing in odd areas. Often they were/are one person shops making unique products which close up when that person retires or dies

    Nabity, is an excellent example http://www.jcnabity.com/