Are German family businesses stultifying?

Germany’s Mittelstand companies are increasingly managed by bosses in their fifties and older, who seem unwilling to make the necessary investment for their business to grow. Many of them are also finding it difficult to attract an heir.

A study by the German state development bank KfW found that around a third of Mittelstand owners are 55 or older and this age group is growing four times faster among the sector’s bosses than in the general population. Many are staying on it appears because they can’t find an heir as their offspring are deciding to follow other opportunities outside of the family business, according to another study from the German Chambers of Commerce (DIHK).

The heir problem in Germany follows research by St Gallen University in Switzerland, which found that few of the next generation of family business owners around the world want to work in the family firm.

In Germany, KfW said weaker investment of these older-managed firms is hitting productivity, and competitiveness as well as jeopardising jobs. Many of the Mittelstand companies are failing to embrace new technologies like the internet, say industry observers. Together with these problems for many of the country’s family businesses, competitive pressures from Asia, particularly China, could have a lasting effect on these businesses.