Europe Must Encourage Entrepreneurship

Historically, Europe has been a global leader in technology and business but now lacks high-end entrepreneurship. The first step towards change is to better understand the European entrepreneurial deficit and the factors behind it. At the European Centre for Entrepreneurship and Policy Reform, we undertook a project to study high-end entrepreneurship, with a focus on ‘superentrepreneurs’—the nearly 2,500 individuals in the world who have built up billion-dollar fortunes by creating new firms or growing small businesses into large, successful ventures. The point is to measure the tip of the iceberg. By looking at superentrepreneurs, we can understand better which countries are more supportive of free enterprise.

Today, some European countries such as Switzerland, Cyprus, Sweden, Ireland, and the UK have many superentrepreneurs. But while five European countries rank as having the highest concentrations of superentrepreneurs, as counted per million adult citizens, Europe as a whole has fallen behind significantly. Large European economies such as France, Spain, Italy, and Germany have a deficit of superentrepreneurs. The same is also true of Eastern and Southern European economies, which lack the market size for creating large, successful enterprises. Europe has only 0.8 superentrepreneurs per million adults, compared with 0.9 in China. Not only does China have more billion-dollar entrepreneurs in total numbers, but even as percentage of its adult population, China is ahead of Europe. The U.S. is far ahead of Europe, with 3.1 superentrepreneurs per million adults.

The following countries have the highest concentration of high-performing entrepreneurs, i.e. businessmen who have created at least one billion dollars per one million inhabitants aged 15-64 years.

• Singapore – 4.7
• Switzerland – 4.1
• Cyprus – 3.6
• USA – 3.1
• Israel – 2.6
• Sweden – 2.0
• Ireland – 1.9
• Australia – 1.8
• UK – 1.8
• Canada – 1.7

By way of comparison, Germany matches China’s count at 0.9, while Japan comes in with 0.7. Globally, other regions of the world are shown in the figure below. 

The Netherlands ranks 16th worldwide when it comes to the number of superentrepreneurs in relation to a country’s overall population. If the rate of superentrepreneurs in the Netherlands were to increase by 20 percent, the Netherlands would have 1.4 superentrepreneurs per million inhabitants. This could lead to the creation of 19,000 jobs, which would result in a 0.2% drop in unemployment.

Klas Tikkanen, chief operating officer at Nordic Capital Advisors explains:

We find that there is a strong link between high-end entrepreneurship and job growth. Countries that have high levels of superentrepreneurs per capita also have lower unemployment. Higher levels of entrepreneurship are linked to lower unemployment amongst all social groups, with the broad middle class benefiting the most.

The vast majority of superentrepreneurs are men; however, those who are women are often found in Asia. Throughout Asia there are 81 women superentrepreneurs, higher than the 29 in North America, and significantly higher than the mere eight in Europe. In Europe, there are many regulations hindering businesses to succeed in female-dominated sectors of the economy, such as health care, education, and elderly care. Asia, particularly China, is more open to private enterprise in female-dominated parts of the economy. This is why otherwise gender equal Europe is particularly far behind in women’s entrepreneurship.

As I have noted in the past, high-end entrepreneurship is important for creating the jobs of the future, something that is needed throughout the world in a time when many old jobs become obsolete.

By comparing the nations of the world, we find that strong property rights, fewer constraints on business, lower taxes on profits and capital gains, and better education are associated with having more high-end entrepreneurs. European policymakers should focus on making business-friendly reforms, encouraging further integration of a common European market, and removing barriers to entrepreneurship in female-dominated fields of the economy. These steps are needed for Europe to catch up in entrepreneurship.