The German way: when corporation size does not confer impunity

At the height of industrial competition, the label introduced by the British Merchandise Marks Act 1887 was originally a stigma designed to protect British manufacturers. Few could have imagined that a century later the phrase would become a global symbol of quality, reliability and engineering excellence.

That change did not happen by chance; it was the result of a long, steady path of industrial and technological development over generations. And on that path, corporate manufacturing capability, the economic power of large enterprises and the state's regulatory authority were bound together within a tight institutional framework.

"Made in Germany" is thus not just a story about products, but also about a socio-economic model in which the formation, operation and oversight of large private corporations play a central role.

In many debates across developing economies, the power of large corporations is often viewed through a moral or political lens, tied to fears of capitalist "greed" or the state's "failure" to regulate.

While such views can provoke strong emotional responses, they tend to obscure the economic nature of the issue.

In a modern industrial and technology-driven economy, economic power is not the product of personal ambition or political privilege but the inevitable outcome of production itself.

Ever-larger capital requirements, increasingly complex global supply chains, more sophisticated technologies, and longer payback cycles have raised entry barriers that only large firms can surmount.

Industrial projects worth hundreds of millions or billions of dollars in sectors ranging from automotive and industrial equipment to semiconductors and energy are beyond the reach of small companies.

What matters is not having large firms, but ensuring their power serves long-term development.

Germany's economic model, built around large private corporations, offers useful lessons for Vietnam in a new era.

After World War II Germany faced a difficult choice: It could return to centralized economic planning or embrace unfettered free markets. But, drawing on Europe's early 20th-century experience, Germany chose neither, and, instead, built a social market economy, known as Soziale Marktwirtschaft.

This model recognizes the central role of markets and enterprises in allocating resources, including the existence and growth of large corporations. But firms do not operate unregulated and are bound by laws that enforce competition, transparency and social responsibility.

What the German model seeks to control is not size itself, but the abuse of size. It is not economic power per se, but whether that power becomes detached from society's broader interests.

A worker at Hoa Phat Dung Quat Steel Factory in Quang Ngai Province, central Vietnam, August 2024. Photo by VnExpress/Giang Huy

Within Germany's institutional framework, the law serves as a hard boundary on economic power. The core principle is simple: Scale is not tantamount to immunity. No matter how influential a company is on the national economy, it does not stand above the law.

Alongside these external constraints, Germany has also built internal, softer limits through co-determination.

Worker representatives sit on supervisory boards, not only to protect social interests but also to help shape strategic decisions and long-term corporate direction.

This structure encourages a balance between profit, employment and sustainability, and helps reduce short-term profit-driven behavior that has fueled corporate crises elsewhere.

Volkswagen and Bosch are often cited as large German private companies with "special" ownership structures, but their defining feature is not ownership. Both operate under the same legal order, where neither size nor capital structure grants special privilege.

Volkswagen includes limited ownership by the state of Lower Saxony to cushion economic and social shocks, but is a publicly listed company operating under market rules and full legal oversight.

The Dieselgate emissions scandal showed that even a large company with state participation is not exempt from strict enforcement, including multibillion-euro penalties, when it breaks the law.

Bosch represents a different ownership model. As willed by its founder, Robert Bosch, the company is not publicly listed. Some 92% of it is owned by a charitable foundation, reducing pressure for short-term profits and enabling sustained investment in research and development.

Yet Bosch operates entirely under market principles, from hiring and compensation to commercial activity and legal compliance. This structure has allowed Bosch to function as a socially sustainable enterprise for nearly 140 years.

These cases point to a broader principle. The issue is not ownership form, but governance. The challenge is to run companies in a way that deliver strong economic performance while maintaining social objectives.

This is a lesson worth studying as Vietnam reforms governance across both private and state-owned enterprises.

One of Germany's most important foundations for technological innovation is its close three-way cooperation between the government, universities and research institutes, and businesses.

The government invests heavily in education, basic science and research infrastructure, universities and research institutes bring about knowledge and large private firms play a decisive role in turning that knowledge into products and industrial capacity.

Today Germany's 20 largest corporations spend €70-75 billion (US$83-89 billion) a year on R&D, accounting for more than half of total business-sector research spending.

After more than seven decades, Germany's development model has produced not only economic growth but also a stable society with strong resilience to external shocks.

Universal, lifelong social and health insurance systems reduce insecurity and support long-term social consensus.

Free vocational and university education, high-quality jobs and wages linked to productivity have helped limit inequality and expand domestic consumption.

Thus, Germany's greatest achievement is not just becoming richer, but becoming richer in an orderly, sustainable and inclusive way.

The lessons are clear: Large corporations contribute most effectively when they operate within an institutional framework that tightly links growth, innovation and market discipline to national development goals.

The need to build large private corporations in Vietnam has become increasingly clear.

For many years growth has relied heavily on banking, finance, real estate, consumption, construction, and short-term advantages.

Many private companies have expanded into multiple sectors, spreading resources thin.

While this model can deliver rapid growth at certain stages, it has revealed fundamental limits in productivity, innovation, shock resilience, and long-term sustainability.

This points to a structural requirement, a shift toward an industrial and technology-based development model with large private corporations at the center of innovation, long-term R&D investment and value-chain reorganization.

Vietnam has taken baby steps in this direction.

VinFast, part of Vingroup, is an effort to build a global industrial and technology group by moving early into electric vehicles, committing large-scale investment, positioning itself internationally and gradually developing domestic manufacturing capacity and supply ecosystems.

FPT is another example, a technology firm built on knowledge and digital services through software cooperation, automotive operating systems and partnerships with OEMs in Japan, the U.S. and other markets.

These cases, alongside many other corporate efforts, show that Vietnam can develop large private corporations rooted in technology and innovation provided they operate within a stable, disciplined and long-term-oriented environment.

From this perspective, these corporations are approaching a critical inflection point when they must move from growth driven by market expansion into a role as leaders in innovation and technology.

How they focus resources, invest in R&D, integrate technology with production, and choose core sectors will determine whether they become long-term pillars of the economy.

Several conclusions follow.

First, the rise of large private corporations can provide the development momentum Vietnam needs, especially as the country faces the risk of "growing old before growing rich." But revenue scale must gradually be converted into core industrial and technological capabilities. The ability to attract and deploy global talent will be a foundational breakthrough.

Second, multi-sector strategies may suit early accumulation phases, but over the medium and long terms, firms must clearly define core industries and prioritize resources in areas that generate lasting productivity and value.

Third, corporate governance reform, particularly the separation of ownership and management and preparation for generational leadership transitions, will increasingly determine the effectiveness and sustainability of large private groups over the next 10 to 15 years.

On that basis, there is reason to believe that in a new era of development, Vietnam can build large, strong and distinctive corporations, led by a generation of entrepreneurs willing to take risks, act in the national interest and uphold social responsibility, in the spirit once captured by Robert Bosch: "I would rather lose money than lose trust."