The end of family business? The Mittelstand and German capitalism in transition, 1949-2000

The Mittelstand sector of the German economy, which is made up of small and medium-sized family firms, is generally not mentioned in debates about German capitalism. This article makes the case that the focus of research on the German economy should shift from large corporate structures to these smaller firms. The classic Mittelstand model, which dominated the economy until about 1970, was characterized by identity of ownership and management, strong emotional investment by owners and staff, and an emphasis on continuity, paternalism, and independence. Beginning in the 1960s, this model was undermined by fundamental changes in the country's economic and sociocultural environment. In response, the firms abandoned a number of their traditional attributes, a process that led to the demise of some businesses and the regeneration of others. Although the modern form adopted by the surviving Mittelstand firms allows them to be less dependent on individual families, to enjoy more access to external capital, and to display more openness and international orientation, they can no longer rely on the prospect of long-term stability, as they did in the past.