Europe not only has a euro crisis, it also has a growth crisis. That is because of its chronic failure to encourage ambitious entrepreneurs.
For all this, Europe produces plenty of corner shops, hairdressers and so on. What it doesn’t produce enough of is innovative companies that grow quickly and end up big. In 2003, analysing Europe’s entrepreneurial gap, the European Commission cited a study which showed that during the 1990s, 19% of mid-sized firms in America were classified as fast-growers, compared with an average of just 4% in six European Union countries. The Kauffman Foundation, which promotes entrepreneurship around the world, argues convincingly that one reason America has outstripped Europe in providing new jobs is its ability to produce new, fast-growing companies such as Amazon, an online retailer, or eBay, an online auctioneer. (...)
Europe was not always so laggardly. When Britain’s industrial revolution spread to the continent after 1848, ambition and access to capital could take a young man far. August Thyssen founded ThyssenKrupp, a German steel group, Eugène Schueller founded L’Oréal, a French beauty empire, and A.P. Møller set the course for A.P. Møller-Maersk Group, a Danish shipping giant. The vast majority of Europe’s big companies were born around the turn of the last century.
Trying to discover what holds back entrepreneurs, the commission last year examined insolvency regimes and found that many countries treat honest insolvent entrepreneurs more or less like fraudsters, though only a tiny fraction of bankruptcies involve any fraud at all. Some countries keep failed entrepreneurs in limbo for years. Britain will discharge a bankrupt from his debts after 12 months; in America it is usually quicker. In Germany people expect it to take six years to get a fresh start, according to the commission; in France they expect it to take nine. In Germany bankrupts can face a lifetime ban on senior executive positions at big companies.
A second important hurdle is finance. Getting seed capital up to €1m ($1.2m) from “friends, fools and family” is pretty easy. (...) For the €1.5m-4m that firms need to work an idea up into a real business model, though, money is in desperately short supply. Institutional investors such as pension funds regard European venture capital as a bad asset class. European venture-capital firms lost money during 2000-10 after the bursting of the dotcom bubble. The total money invested in European venture capital halved from €8.2 billion in 2007 to €4.1 billion last year. Much of it now comes from governments rather than from private investors.
The third big obstacle is labour law. If young firms are to survive near-terminal mistakes, or fluctuating demand, they need to be able to reduce staff costs quickly and cheaply when necessary. That is far harder in many European countries than elsewhere. The complexity and cost of firing people in Europe is a big concern for American venture capital, says Georges Karam, the chief executive of Sequans Communications, a French chipmaker for smartphones which went public on the New York Stock Exchange last year. A fund in Boston recently pulled its investment in a start-up which its French founder had intended to begin in America but then had to bring back to France for family reasons.
The cost of paying out large severance packages (six months of severance pay is typical even for very recent hires) can be a huge drain for a small company. “In San Francisco and in China, a communist country, I pay one to two months,” says a beleaguered French chief executive who does not want his name attached to such a sensitive subject. Big severance packages also make it much harder for start-ups to recruit the professional managers that can take them into the big league. Experienced executives are loth to forgo such reassuring goodies by resigning.
Toch is het niet allemaal duisternis, zeker niet nu het crisis is:
Though they have suppressed demand and made financing ever harder, the great recession and the euro crisis may also mark a long-term change in Europeans’ perception of risk. For executives, joining a start-up is less of a gamble when big companies are shedding staff. Since the crisis began in 2007, says Martin Varsavsky, an Argentinian serial entrepreneur who has founded a number of telecom companies in Spain, it has been noticeably easier for his current venture, Fon, a global Wi-Fi community, to recruit. The engineers he wanted to hire used to spurn him for Telefónica, a telephone giant, or Prisa, a media company; now those firms are firing people, well-qualified people are more willing to join a new company.
(...) There are millions of young people looking for work. And Europe has far fewer lawyers waiting to make life difficult for young firms and lots of protected, uncompetitive sectors ripe for disruption.
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Jeroen Bakker
Jeroen Bakker
Europe not only has a euro crisis, it also has a growth crisis. That is because of its chronic failure to encourage ambitious entrepreneurs.
Toch is het niet allemaal duisternis, zeker niet nu het crisis is:
Voor wie tijd heeft is dit artikel van The Economist de moeite waard. En lees ook de comments voor een meer gebalanceerde blik.
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