by Michael Cao
This summer, I worked as a researcher at the Institute für Mittelstandsforschung (IfM) in Bonn, Germany. Sociologists and economists at IfM Bonn work closely with German government ministries to conduct applied research into Der Mittelstand. At its core the Mittelstand refers to the assortment of German companies that are both owned and managed by individual entrepreneurs and their family members.
The Mittelstand is the backbone of the German social market economy. Almost 94% of all German companies, using the owner-manager criterion, are part of the Mittelstand. Employing the majority of the private sector workforce, Mittelstand companies are viewed as socially responsible organizations with deeply embedded ties to their employees, customers, and regional communities. They are characterized by independence from capital market financing, organizational flexibility, and innovativeness, solving problems resourcefully and supplying niche markets with quality goods and services. Many are remarkable for their ability to sustain themselves and to stay competitive across multiple generations. This historical transmission of business, values, and legacy means that belonging to the Mittelstand represents a merging of self and social identity. Mittelstand entrepreneurship can define what one does, but also who one is.
The Mittelstand is often at the center of German economic policymaking. For example, in 2021 the Social Democrats, Greens, and Free Democrats agreed to reform how the government contracts to purchase goods and services without increasing access barriers for the Mittelstand, as Mittelstand companies are essential suppliers that competitively bid for these public contracts. The German government asked IfM Bonn to study how they could redesign public procurement law to be more Mittelstand (and small to medium enterprise) friendly. As such, I worked with colleagues this summer to identify factors that most affected Mittelstand participation in public procurement.
As part of an institutional research apparatus frequently working in German, the immersive and sociological research experience was intense. I worked closely with German government officials and Mittelstand-owners and interest groups to study federal, state, and EU-wide procurement legislation. We found that one of the biggest barriers to enterprise participation in public procurement was the lack of necessary human and social capital to successfully navigate the bidding process. Small firms often did not have the means to attain economies of scale, rendering contract sizes too large for the average Mittelstand company to handle. Additionally, negotiating the bureaucratic, rational-legal system of non-standardized paperwork and protocols was costly and time consuming.
The IfM Bonn will release its final report before the end of this year. Among others, it will recommend that the German government:
We wait to see how the coalition government incorporates these recommendations into law.
My experience this summer was made possible due to the support of Professors Martin Ruef, Lisa Keister, Jenifer Hamil-Luker, and Jen’nan Read of Duke Sociology; Susanne Freytag and Andrea Larson of Duke German Studies; and my colleagues at IfM Bonn, with whom I have come to share bonds characteristic of a family and with whom I have kept an earnest promise to see again.