While the United States has long been at the forefront of technological and economic development, Europe faces a high-end entrepreneurship deficit. Understanding the contrasting trajectories of the United States and European countries illustrates the importance of new business creation and economic growth. High-end entrepreneurship is linked to better job prospects for the middle class – a more important goal than ever in this time of job market uncertainty, when U.S. policymakers have questioned employee benefits. extremely successful businesses.
We have undertaken a project to study high-end entrepreneurship. The work focuses on “superentrepreneurs” – the nearly 2,500 people worldwide who have built billion-dollar fortunes by starting new ventures or growing small businesses into successful big businesses. It is a question of measuring the tip of the iceberg: by observing these superentrepreneurs, we better understand which countries are the most favorable to free enterprise.
Historically, Europe has been a world leader in technology and entrepreneurship. Switzerland and Cyprus are home to many billionaires and have some of the highest concentrations of high-level entrepreneurs in the world, behind Singapore (the United States ranks fourth in the world in this measure). Some other European countries, such as Sweden, Ireland, and the United Kingdom, rank among the top ten and still maintain thriving businesses.
Today, however, Europe as a whole lags behind not only the United States but also China when it comes to high-impact entrepreneurship. And many large European countries, such as France, Spain, Italy and Germany, have a deficit of superentrepreneurs. Even Eastern European economies adopting free-market policies lack both the scale and the research and development investment to generate more than a few high-impact entrepreneurs. Europe has only 0.8 superentrepreneurs per million, compared to 3.1 per million in the United States
Globally, one in 20 billionaire entrepreneurs is a woman. In China, which has 0.9 superentrepreneurs per million, 71 women have earned billion-dollar fortunes through entrepreneurship. The United States has 28 female superentrepreneurs and Europe only eight. In European economic systems, female-dominated sectors such as education, health, and elderly care are constrained by oligopolies and public sector regulations, reducing opportunities for high-impact entrepreneurship. In contrast, the United States, as well as Asian economies such as China, are more open to entrepreneurship in health and education, which is why the otherwise egalitarian Europe is so far behind in this regard.
Strong property rights, fewer constraints on businesses, lower taxes on profits and capital gains, and better education are associated with having more high-end entrepreneurs. One more superentrepreneur per million adult population is linked to a 0.88 percentage point drop in unemployment. For the middle class with an intermediate level of 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 policy makers should focus on putting in place business-friendly reforms, encouraging further integration of a European common market and removing barriers to entrepreneurship in sectors of the economy dominated by feminine.
The lesson for US policymakers: don’t be complacent. Past successes do not guarantee the promotion of entrepreneurship in the future, and stagnation – not to mention falling behind in global competition – is a real possibility, in the absence of smart policy. We believe that renewed interest in stimulating entrepreneurship is needed on both sides of the Atlantic.