THE word Mittelstand has no exact equivalent in French but has a clear enough meaning: as the euro crisis eats away at the confidence and success of France’s big national champions, emulating Germany’s medium-sized, mostly family-owned businesses is seen as the way to boost French growth, jobs and exports. The Mittelstand has become an ambition. What is not clear is how far the French can achieve it.

This week they unveiled their big effort to do so. François Hollande’s government announced a new bank, merging various bodies set up by the previous administration to steer finance (public and private) into middling firms. The new Banque Publique d’Investissement (BPI) looks very like Germany’s venerable KFW (Kreditanstalt für Wiederaufbau), the reconstruction bank set up after 1945.

Characteristically, the French in their centralising way are latching on to the only bit of the German system that has anything to do with the federal government. The heart of the Mittelstand miracle lies not in Berlin but under the rolling fields of the German Länder (states).

By sticking to their knitting and improving efficiency, the French believe, German firms have prospered in specialised markets, earning good margins which finance more innovation and produce a virtuous circle. In contrast, despite their strength in consumer industries such as fashion, food and drink and in high-tech nuclear and aerospace, France’s large companies have been left behind since 2000.

Strictly, a Mittelstand firm has fewer than 500 employees and turnover of less than €50m ($66m), though in practice the term also applies to larger firms. It took France until 2008 to come up with its own term for Mittelstand: ETI (entreprises de taille intermédiaire), which means in-between-sized firms: ie, bigger than small businesses but not giants. Most ETIs have between 250 and 5,000 employees and a turnover of up to €1.5 billion. According to a study by Ernst & Young, a business-services group, there are twice as many such creatures in Germany as in France.

But for Ludwig Erhard, the economics minister who crafted West Germany’s post-war revival, the Mittelstand was never just about numbers. “It is more an expression of a state of mind and a specific attitude,” he wrote in 1956.

Nicolas Sarkozy spent five years as president trying to imbue the French with a similar attitude. His idea was to create a state-backed fund, the Fonds Stratégique d’Investissement (strategic investment fund, or FSI), to support companies—large, medium and small. The fund is now being subsumed into the new BPI. So far it has invested over €7 billion, taking minority stakes alongside private investors in more than 1,800 businesses. Last week it published a study looking at why medium-sized firms in France lag those in Germany.

L’état le veut

History provides part of the answer. The term Mittelstand originally referred to artisans who flourished in the 19th century. But it was Germany’s post-war economic settlement that consolidated the position of middling firms. In 1945 Germans started reconstruction with a distaste for big business, which was tarred by association with the Nazi regime. The division of the country further helped regional smaller firms. Siemens and Daimler, big firms ousted from Berlin, breathed life into Bavaria and Baden-Württemberg, hotbeds of the Mittelstand. In contrast, France went in the opposite direction. Private firms left basic industries and capital goods to Germany and competed with Italy in consumer goods, while the state built up national champions in then-emerging sectors such as nuclear power and aerospace.

This history helps explain the different roles of the state. Guy Maugis, chairman of the Franco-German chamber of commerce, points out that when France wants to do something to improve competitiveness it starts with top-down decisions in Paris; the new bank is a case in point. Mittelstand firms, by contrast, look to their regional governments and regional banks for support. Studies have identified attachment to the local area and close connections with these banks as factors in their long-term development.

But history and traditions of government are not everything. Jean-Daniel Weisz, one of the report’s authors, compares the way German firms and their French counterparts operate. French middling companies, he says, have twice as many layers of management between the boss and the shop floor: usually 18, compared with a German maximum of nine. German firms also pay more attention to their supply chains, he argues, taking managers from their suppliers on trade trips to China, for example. This is something French firms rarely do. Germans firms tend to promote specialists, technicians who know the answers to precise technical questions, whereas French firms promote from an elite cadre of generalist engineers.

Some of these German management practices can doubtless be copied. Layers of management can be stripped out, different people promoted. But the weight of history and governing traditions cannot so easily be shifted. Consider France’s efforts to help middle-sized firms adopt the German approach of relentless incremental innovation. Jean-Yves Gilet, the chief executive of FSI, is taking his fund out into the provinces and forming public-private partnerships to boost regional companies and help them become leaders in their sectors. But injecting money into little companies is no magic wand. Mittelstand firms themselves usually prefer steady growth from retained profits to borrowing. The French (like other would-be Mittelstand-mimickers) have a way to go.