Applicability of the German Mittelstand Model in Iran: A Framework for the Development of Small and Medium-Sized Enterprises

Document Type : Research Paper

Author

Department of Management, Faculty of Management, Payame Noor University (PNU), Tehran, Iran.

Abstract

ABSTRACT



Objective: The German Mittelstand model, recognized as one of the most successful frameworks for supporting the development of family-owned small and medium-sized enterprises (SMEs), has played a pivotal role over recent decades in shaping a resilient, innovative, and regionally grounded economy in Germany. Emphasizing long-term commitment, family ownership, sustainability, and close integration with local institutions, this model holds a unique position within German industrial policy. The present study aims to evaluate the transferability and adaptability of this model's core components to the context of Iran’s economy, with the broader goal of revitalizing local capacities to establish a homegrown model for SME development. The central research question explores the extent to which the key features of the Mittelstand model align with Iran’s institutional and economic structures and under what conditions these elements may be gradually implemented.



Method: This applied study adopts an analytical-comparative approach to examine the feasibility of localizing the German Mittelstand model within Iran’s economic framework. The research methodology is qualitative in nature and relies on document-based content analysis, structural comparison, and policy assessment. Data collection was conducted in two main phases: (1) a literature and document review, and (2) a comparative analysis of secondary data. The analysis is structured on three levels: (1) Comparative Analysis, aimed at identifying the strengths of the German model and assessing structural gaps between German and Iranian SMEs; (2) Contextual Analysis, which examines the institutional, economic, and cultural foundations in Iran for potential localization of the model; and (3) Policy Analysis, focused on identifying policy gaps and offering actionable recommendations. Given the qualitative orientation of the study, it is based entirely on secondary data and does not define a specific statistical population.



Results: The findings of this research indicate that there are significant differences between the structure and performance of Small and Medium-sized Enterprises (SMEs) in Iran and the successful Mittelstand model in Germany. These differences are not merely technical and managerial in scope but are rooted in fundamental economic, institutional, cultural, and policy disparities.The German model is founded upon pillars such as multi-generational family ownership, a long-term growth strategy with a focus on niche markets, continuous investment in research and development (R&D) through links with universities, and financial independence based on self-financing or access to stable bank credit. These characteristics have endowed these firms with high resilience and continuous innovation.In contrast, Iranian firms are predominantly individual-centric, short-term-oriented, and unstable, with their strategies focused on survival amidst volatile economic conditions. A heavy dependence on short-term, high-risk bank facilities, the lack of a systematic succession system, and a structural disconnection from scientific institutions are the main obstacles to their sustainable growth and competitiveness.The contextual analysis reveals that localizing this model in Iran faces serious obstacles. Macroeconomic instability (high inflation and currency fluctuations) precludes the possibility of long-term planning. Institutional weakness, including the absence of independent development banks, fragmented policymaking, and the inefficiency of support structures, has made the business environment unpredictable. From a cultural perspective, although the family-oriented structure is a potential capacity, a culture of short-term profit-seeking and a lack of financial transparency hinder the formation of stable family brands.Nevertheless, the research identifies potential capacities for an “intelligent localization.” This process necessitates a multi-dimensional and gradual policy package.



Conclusion: The findings demonstrate that applying the logic and structure of the Mittelstand model to empower Iranian SMEs requires transformation along three interconnected pathways. First, reforming and reconstructing supportive institutions—including the banking, taxation, and regulatory systems—to establish sustainable infrastructure for enterprise growth. Second, revising macroeconomic policies to eliminate ineffective interventions, stabilize regulations, and enhance long-term incentives for productive entrepreneurship. Third, reinforcing regional linkages and creating institutional coordination between educational, technical, and industrial sectors to enhance skill-building, innovation, and sustainable local employment. The study underscores that the realization of a successful indigenous model cannot be achieved through direct imitation of foreign examples, but rather through a gradual, policy-driven, and context-sensitive design grounded in local participation and institutional alignment.



Keywords: Small and Medium Enterprises, Mittelstand Model, Family Businesses, Applicability, Iran.

Keywords

Main Subjects

References

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Journal of Entrepreneurship Development
Volume 18, Issue 4
October 2025
Pages 31-54

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