The ZEW study defines hidden champions as companies with less than 10,000 employees which generate the majority of sales abroad. "Hidden champions", according to the study, hold a global market share of one to ten per cent - depending on the size of the respective sales market - and have achieved a growth in sales that exceeds the sector average by at least ten per cent in the previous five years.
The study shows that the favourable market position of hidden champions is attributable to their strong innovation orientation. "More than 80 per cent of hidden champions have either introduced product or process innovations in the past three years - ten per cent more than companies of a similar size in the same sector. At the same time, hidden champions are more efficient in designing innovation processes," says Dr. Christian Rammer, deputy head of the ZEW Research Department "Industrial Economics and International Management" at ZEW and co-author of the study. Hidden champions generate higher innovation-driven revenues with a similar level of R&D spending. They also place greater emphasis on continual research, and they more frequently commission third parties to conduct research and development projects.
The analysis of MIP data shows that the success of hidden champions is largely due to their superior innovation management, which combines market aspects and technology in an excellent way. About 60 per cent of these companies have introduced marketing or organisational innovations. It is the companies themselves that generate the key incentives for innovation. The ZEW study identifies two other drivers of innovation: demanding customers from the private sector and university collaborations. Some 60 per cent of hidden champions enter into cooperation with universities for innovation projects.
In what sectors do we find hidden champions? The ZEW study indicates that 86 per cent of hidden champions operate in the industrial sectors and 14 per cent in the service sectors. Almost a quarter is active in mechanical engineering, followed by 10.5 per cent in the electronics industry. Medical technology, metal product manufacturing, chemical industry, metal production and plastics processing each make up between five and six per cent of hidden champions. When it comes to service providers, hidden champions can be found among information services, software development, and R&D services (five per cent each) as well as among engineering offices (two per cent). In the pharmaceutical industry, seven per cent of all companies are hidden champions - the highest share within one sector.
Germany is the home of approximately 1,500 hidden champions. This is the equivalent of about 0.6 per cent of all companies with five or more employees in the manufacturing industry and business services.