Historically, Europe has been viewed as the quieter sibling in the international family of entrepreneurship. Commentators have pointed to a higher degree of risk aversion, the difficulties of raising finance, and even differences between European education systems and the education systems in the US and Asia as reasons for this reticence. These differences have been eroding, however, and the European entrepreneurial boom is underway.
Conditions and decisions
A survey by Eurobarometer, carried out in 2002, found that EU citizens were more risk-averse than American citizens and that they were much less likely to want to start their own business. The survey also showed that EU-based startups grew at slower rates than those based in the US. To address these problems, the EU commission adopted a green paper on Entrepreneurship in Europe in January 2003 in order to determine how to support European talent. A decade on, the measures adopted are starting to bear fruit.
The Organisation for Economic Co-operation and Development (OECD) survey of barriers to entrepreneurship carried out in 2009 showed that many countries in Europe have lower barriers to entry than the United States now.
Another challenge historically faced by European entrepreneurs has been the difficulty of encouraging people to relocate. Relocations within the US are common and, as a result, startups tend to become concentrated in specialist hubs: Silicon Valley being the most obvious example. Linguistic and cultural barriers still hold some Europeans back, when it comes to relocating, although traditional European risk aversion may also have a role to play. “It sometimes is a challenge to get people to move [the 240km] from Cambridge to Bristol,” Stan Boland, head of chip manufacturer Icera, told the Economist recently.
Change in European climate
But that culture is changing too. A concerted effort by European education institutions is putting entrepreneurship at the heart of education. Alain Fayolle of the EM Lyon Business School and the OECD Local Economic and Employment Development Programme says that entrepreneurship education is now being offered at all levels, from bachelor’s degrees through to PhD programmes. It’s not yet as effective as it could be, however. He stresses that entrepreneurship is usually elective rather than compulsory and has a tendency to be taught in lectures, rather than in a more effective participatory setting. These cultural changes are still meeting resistance from some entrenched ideas, however. “Why educate young people to become entrepreneurs if the system sends them the message that the ultimate goal is to work for the state and that job security is what the majority of young people, and particularly graduates in, say, France aspire to?” he says.
Yet inspiration towards entrepreneurship may be coming from an unlikely quarter: the current atmosphere of economic uncertainty. As jobs in the corporate sector are lost many people are returning to study. The number of MBA applicants was is up 10% in 2010 in most European business schools. When asked why they wanted to undertake an MBA, 30% of attendees of the 2010 QS World MBA Tour said that they wanted to become an entrepreneur, up from 25% the previous year, according to Business Week. Counter-intuitively, the downturn may be driving the growth in startups as this last cultural barrier to entrepreneurship is eroded.
Micro-multinationals are key
The influential Lisbon Council think tank published a brief in October last year which highlighted the impact of the new-found entrepreneurial spirit on Europe’s economic recovery. It says that “micro-multinationals” – startups that are global in reach – are the key to European prosperity. “Large companies are under pressure to deliver more with less – a fact which may well account for the jobless economic recovery we have seen in 2010 and 2011,” said the brief, stressing that large companies are probably incapable of delivering the jobs that politicians hope for. By contrast, hopes for recovery rest with SMEs which can harness the internet and other new platforms to enter the global markets with a minimum of bureaucracy and overheads. Anthony Williams, senior fellow of the Lisbon Council said that technological advances mean that SMEs can now access a thriving secondary market for global business services, including cloud computing, online sales and advertising platforms, and a growing army of freelance workers. Around 15% of all workers in Europe (around 32 million people) are classified as self-employed and this represents an unprecedented pool of talent that can be deployed by these new micro-multinationals.
Yet the European landscape for starting up is very uneven. Just comparing the indicators on how long it takes to start a business and how many steps there are in the procedures of incorporation, we see a fragmented picture. If Europe-wide initiatives are to work, the overhead has to be evened down and reduced both at the same time.
The erosion of long term job security, the focus on entrepreneurial skills in education, and the lowering of barriers to entry are all part of the recipe for greater entrepreneurship in Europe. Framework programmes such as Horizon 2020, The EU Framework for Research and Innovation with an €80 billion budget from 2014 to 2020, are aiming to drive the advancement of the whole economic union. Don Tapscott, chairman of the New Paradigm think tank and a professor of management at the University of Toronto, says that Europe is, quite rightly, shunning the path of complete laissez-faire that has been pursued in the US. He told Euractiv.com in December of last year: “We need to learn that there is a role for government. This is a serious discussion in the US at the moment [where senior Republican figures] want as little government as possible. What these people are missing is the kind of strategic oversight that the EU is deploying with Horizon 2020, which is a positive kind of thing and an antidote to the anti-government point of view… What is required for an innovation economy is a vibrant, open, competitive, but also fully transparent society, in which core IT is a basic right of people to use.” The hope for Europe’s economic future is in the hands of the entrepreneurs.