Personal anecdote time (please correct me if I got it wrong): go to almost any backwater German village and there'll be small/mid sized industry on the outskirts. From semi-high tech (e.g. manufacturing precision instruments) to "simpler" stuff like carpentry shops or metalworkers. In Germany, the small-mid sized business that actually builds stuff (as opposed to just services) is still pretty big. Sure, most of it is invisible on the international scale, but it's there and underpins an economy of specialists.
Driving through similar places in France the difference was striking. There didn't seem to be any of this decentralized economy. Again, I don't mean to draw conclusions, just stating my very limited observation.
>Sure, most of it is invisible on the international scale, but it's there and underpins an economy of specialists.
Actually a not insignificant part of these backwater businesses are so called Hidden Champions[1]. Basically, small companies who are still leader in the world market for their very specialised product.
Yep, stuff like Nordischer Maschinenbau Rud. Baader. In the 1920s they were the first to produce a machine to automatically decapitate and debone fish, and they've been the world leader on this and related tech ever since,
What does "small companies" mean in this context ?
Do they do engineering or manufacturing?
And how could they maintain an advantage over so many others and of course over large companies ? Where's the r&d budget coming from ? And what about marketing ?
They're businesses that hyper-specialize in one area and have done so over the long-term. The markets are too small for some giant conglomerate to come in and dominate, so it gives an opening for smaller firms to dominate the global market for said good - while it won't have your next unicorn, the markets are great enough to create prosperity for the owners and the local region. Germany has this spread over the country fairly uniformly, so it creates a wide platform for economic prosperity even in rural areas.
The companies themselves are usually under 50M Euro and have under 500 employees, and export-oriented. They've been a big target for Chinese acquisition, usually for companies that don't have any family to inherit the enterprise.
Look at the data. Even within the EU, Germany is behind the level you would expect based on every indicator (institutions, education, productivity, etc.).
And this is basically a function of Germany's economic development. Germany industrialised quickly by extracting from consumers. Forced savings, cheap loans to entrepreneurs, etc. The model isn't optimised for competition and new entry.
Germany hasn't really moved on from that point. Industry and banking is still heavily concentrated (the level of corporatism is far beyond anything outside of East Asia). Capital markets still don't really exist (amazingly, given current ECB policy). Consumers are still paying a massive surplus over to the corporate sector (through low wages and forced saving).
Rocket Internet is the kind of exception that proves the rule. They were successful but only by doing something totally inexplicable in any other context (i.e. their shareholding model is a function of the awful state of finance in Germany).
Definitely, the govt have trying very hard on this for a while. But with no real results because the model seems to produce what voters want. There are signs that things are coming apart (particularly in banking) but before that point, nothing will change. It just makes no sense to compare Germany to an entrepreneurial society, that has never been the goal.
Driving through similar places in France the difference was striking. There didn't seem to be any of this decentralized economy. Again, I don't mean to draw conclusions, just stating my very limited observation.