Hidden champions as a determinant of regional development: An analysis of german districts

Abstract

Hidden Champions (HCs) are defined as market leaders in niche markets. They represent the success of the German Mittelstand like no other group of firms. However, little is known on how HCs contribute to regional development. Given their export strength, regional embeddedness, and strong vertical integration we expect HCs to have a profound effect on regional development. Using a German dataset of 1,645 HCs located in 401 German districts, we analyze the effect of HCs on a variety of regional development dimensions. Our results show that HCs are not equally distributed across regions and influence regional development. Regions with a higher number of HCs show strong regional economic performance in terms of median income. Moreover, HC intensity affects regional unemployment and trainee rates as well as regional innovation in terms of patents. Surprisingly, we did not find an effect of regional HC intensity on regional R&D levels and GDP. We can further conclude that the effect of HCs is not limited to the particular region in which they are located but that sizable spillover effects exist. Besides its contribution to the regional development literature, our study adds to a better understanding of the HC-phenomenon. Implications for regional policy makers are discussed.

Financial performance of hidden champions: Evidence from German manufacturing firms

“…Our study contributes to three strands of literature. First, this work contributes to a better understanding of the HC phenomenon (e.g., Audretsch et al, 2018Audretsch et al, , 2020Benz et al, 2021;Lehmann et al, 2019) and shows that the HC strategy can indeed lead to stronger financial performance as measured by ROA. Second, as HCs are an important part of the German Mittelstand, our study also contributes to the broader literature on the (German) Mittelstand (e.g., Berghoff, 2006;Block & Spiegel, 2013), particularly its success factors (De Massis et al, 2018).…”

“…The authors' findings further show that country context and entrepreneurship strategies interact with each other and that country-specific institutions can explain the high prevalence of niche entrepreneurship in Germany. Focusing on the regional level, Benz et al (2021) examine the impact of HCs on various regional economic indicators in Germany. They find that a high regional HC intensity has a positive effect on the regional economy, for example in terms of income level or unemployment rate.…”

“…This is the first study to analyze the performance of HCs in a large-scale quantitative study. By evaluating the accounting performance of HCs in terms of ROA and ROE, we extend research on the characteristics of HCs (e.g., Audretsch et al, 2018Audretsch et al, , 2020Benz et al, 2021;Lehmann et al, 2019) and Mittelstand firms (Berghoff, 2006;Berlemann & Jahn, 2016;Pahnke & Welter, 2019). We answer the question of whether and to what extent HCs outperform other Mittelstand firms.…”

Hidden champions: a review of the literature & future research avenues

“…In this context, the authors examine the system of dual higher education in Baden-Wuerttemberg and its capability to stimulate the stock of specific human capital in Baden-Wuerttemberg. Another promising subfield within the stream of economic geography examines the importance of innovative businesses such as hidden champions for the development of small towns in peripheral locations (Vonnahme et al 2018;; Vonnahme and Lang 2019) and for regional economic development (Benz et al 2021).…”