Purpose In contrast to the predictions from the family business and the small- and medium-sized enterprise internationalization literatures, Hidden Champions are world-market leaders exhibiting a high share of exports. The purpose of this study is to analyze their strategy of internationalization of Hidden Champions in Germany and find that the international success and strong, sustained performance emanates from their product type, enabling to successfully pursue a niche strategy for differentiated premium products. Design/methodology/approach The authors first conceptually explore how Hidden Champions pursue strategic internationalization, and then analyze a sample of N = 2,690 Hidden Champions to examine why Germany has been able to generate the highest per capita share of Hidden Champions in the world. Findings The study finds that on both a micro and macro level, the strong and sustained performance of Hidden Champions is driven by product type and quality strategies. Niche strategies for a knowledge-intensive, technological product enable the firm to lock-in customers. However, to safeguard the internalization of highly specific quasi-rents, Hidden Champions enter foreign markets through fully owned subsidiaries, retaining control and residual property rights. The second finding of this paper is that Germany has succeeded in deploying its high level of human capital into the Mittelstand through highly skilled workers. Research limitations/implications Unfortunately, no micro-level panel data are available. Still macro-level data beginning in the nineteenth century provide strong empirical support for the hypothesized causality. Originality/value This is the first paper to link the strong and sustained export performance of Germany to the Hidden Champions by examining the origins of the German Mittelstand model, dating back to the social, political and economic developments of nineteenth century.

The Silicon Valley model of high-tech entrepreneurship has been placed in the spotlight by academics in the past at the expense of the plenitude of Main Street businesses-businesses beyond the high-tech and ICT sector and the highly scalable platform economy. This study aims at resolving this one-sidedness contributing to unexplained aspects of entrepreneurship theory. Our focus lies on a subgroup of Main Street companies, known as hidden champions, as the counterpart of Silicon Valley high-growth firms, the unicorns. In spite of a worldwide distribution, just as unicorns are highly skewed to a few countries and regions, so are hidden champions. On a snapshot, it appears that unicorns and hidden champions are substitutes rather than complementary to one another. We illustrate that the emergence and skewed distribution of these two types of firms can be explained by the institutional context, in particular the provision of human capital. In an explorative approach, our line of reasoning puts forward that the centralization (public provision) vs. decentralization (individual investment) in organizing the accumulation of human capital helps to explain the different and path dependent evolution of both, the Silicon Valley and the Main Street model of entrepreneurship.

Entrepreneurship research has gravitated towards a singular focus on the Silicon Valley model as the standard model of entrepreneurship. By contrast, some entrepreneurship scholars have more recently suggested embracing entrepreneurship as diverse and colorful. We build on this latter stream of literature by analyzing the diversity of entrepreneurship from complementary institutional arrangements inherent in national economies. Drawing from Robert’s (2004) model of complementarities between context and organizational choice variables, we analyze the contextualization of diverging entrepreneurship models. Our findings indicate that some economies are complementary to a specialized niche strategy, while others instead promote a scalable mass-market manifestation of entrepreneurship.

Substantial efforts have contributed to overcome the scarcity of research on hidden champions. Nevertheless, literature has yet missed to compile a comprehensive review. Drawing on the insights of 112 publications, four strands of literature could be distinguished to unravel the essence of hidden champions. Research on hidden champions studies their (1) internationalization strategies, (2) R&D and innovation strategies, the (3) worldwide and regional geographic distribution of hidden champions and finally (4) other research that could not be assigned to one of the first three strands. A hand-collected sample of 1372 German hidden champions exemplifies the key insights from the reviewed research articles. Discussing the findings of the different literature strands aims at drawing a conclusion on their main results and analytical pitfalls to eventually unfold and motivate future research avenues.

While research on universities is well elaborated within the field of higher education, less effort has been made to study other institutions of tertiary education. Complementary to the need of hybrid (specific and general) human capital for German Mittelstand firms, the system of tertiary dual education in Germany has succeeded in hitting two birds with one stone. Though Germany has often been criticized for its low rate of university graduates, the critique has largely failed to acknowledge the differentiation of Germany's dual tertiary education model. By highlighting the case of Baden-Württemberg and its Cooperative State University system, we illustrate the diversity of Germany's landscape of higher education institutions. It appears that the availability of a large pool of tertiary dual educated students contributes in particular to the advantage of Mittelstand firms in Baden-Württemberg.