While the United States has long been at the forefront of technological and economic development, Europe faces a high-level entrepreneurship deficit. Understanding the contrasting paths of the United States and European countries illustrates the importance of new business formation and economic growth. High-end entrepreneurship is linked to better job prospects for the middle class, a goal more important than ever during a time of job market uncertainty, when US lawmakers have questioned the social benefits of hugely successful companies.
We carried out a project to study high-level entrepreneurship. The work focuses on “super entrepreneurs,” the nearly 2,500 people in the world who have amassed billion-dollar fortunes by starting start-ups or growing small businesses into large, successful companies. The point is to gauge the tip of the iceberg: By looking at these super-entrepreneurs, we can better understand which countries are most supportive of free enterprise.
Europe has historically been a world leader in technology and entrepreneurship. Switzerland and Cyprus are home to many billionaires, and have one of the highest concentrations of high-end entrepreneurs in the world, behind only Singapore (the United States ranks fourth globally on this measure). Some other European countries, such as Sweden, Ireland and the UK, are in the top ten and still foster successful businesses.
Today, however, Europe as a whole lags behind not only the US but also China in terms of high-impact entrepreneurship. And many large European countries, such as France, Spain, Italy and Germany, have a deficit of super-entrepreneurs. Even those Eastern European economies that are adopting free-market policies lack both the size and the investment in research and development to spawn more than a few high-impact entrepreneurs. Europe has just 0.8 super-entrepreneurs per million, compared to 3.1 per million in the US.
Globally, one in 20 billionaire entrepreneurs are women. In China, which has 0.9 super-entrepreneurs per million, 71 women have earned billion-dollar fortunes through entrepreneurship. The United States has 28 super-entrepreneurs and Europe only eight. In European economic systems, female-dominated sectors such as education, health and care for the elderly are constrained by oligopolies and public sector regulations, reducing opportunities for high-impact entrepreneurship. By contrast, the US, as well as Asian economies like China, are more open to entrepreneurship in health and education, which helps explain why gender equality in Europe is otherwise sorely lacking. so far behind in this regard.
Strong property rights, fewer restrictions on doing business, lower income and capital gains taxes, and better education are associated with having more high-level entrepreneurs. One more super-entrepreneur per million adult population is associated with 0.88 percentage points less unemployment. For the middle class with intermediate education, this figure rises to 1.1 percentage points.
Although Europe plays a key role in global entrepreneurship and technological progress, the continent currently suffers from an entrepreneurial deficit. European policymakers should focus on business-friendly reforms, fostering further integration of a common European market and removing barriers to entrepreneurship in women-dominated fields of the economy.
The lesson for US politicians: don’t be complacent. Past success is no guarantee of future entrepreneurship, and stagnation, let alone falling behind in global competition, is a real possibility, absent smart policy. We believe a renewed focus is needed to boost entrepreneurship on both sides of the Atlantic.
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