While the United States has long been at the forefront of technological and economic development, Europe faces a shortage of high-end entrepreneurship. Understanding the contradictory 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 middle-class employment—a goal more important than ever during a period of labor market uncertainty, when US policymakers questioned the social benefits of hugely successful companies.
We have undertaken a project to study high-end entrepreneurship. The business focuses on “super-entrepreneurs” – approximately 2,500 individuals in the world who have amassed billions of dollars in fortunes by setting up new businesses or growing small businesses into large, successful ventures. The point is to measure the tip of the iceberg: by looking at such super-entrepreneurs, we can better understand which countries are most supportive of entrepreneurship.
Historically, Europe has been a world leader in technology and entrepreneurship. Home to many billionaires, Switzerland and Cyprus have among the highest concentrations of high-profile entrepreneurs in the world – after only Singapore (the US ranks fourth globally on this metric). Some other European countries, such as Sweden, Ireland, and the United Kingdom, rank among the top ten, and still nurture successful businesses.
Today, however, Europe as a whole lags behind not only the United States but also China in high-impact entrepreneurship. Many large European countries, such as France, Spain, Italy and Germany, have a shortage of super-entrepreneurs. Even Eastern European economies that adopt free market policies lack the scale and investment in research and development to generate more than a few high-impact entrepreneurs. Europe has only 0.8 distinguished entrepreneurs per million, compared to 3.1 per million in the US
Worldwide, one in 20 billionaire entrepreneurs are women. In China, which has 0.9 large entrepreneurs per million, 71 women have earned fortunes worth billions of dollars through entrepreneurship. The United States has 28 great businesswomen, and Europe only eight. In European economic systems, women-dominated sectors such as education, health, and elderly care are limited by public sector monopolies and regulations, reducing opportunities for high-impact entrepreneurship. By contrast, the United States, as well as Asian economies such as China, are more open to entrepreneurship in health and education, which helps explain why a gender-equal Europe lags behind in this regard.
Strong equity, fewer restrictions on business, lower taxes on profits and capital gains, and better education correlate with having more outstanding entrepreneurs. One more entrepreneur per million of the adult population is associated with a 0.88 percentage point drop in the unemployment rate. For the middle class with an average education, this figure rises to 1.1 percentage points.
Although Europe plays a major role in global entrepreneurship and technological advancement, the continent is currently suffering from an entrepreneurial deficit. European policy makers should focus on conducting business-friendly reforms, encouraging greater integration into a European common market, and removing barriers to entrepreneurship in areas of the economy that are dominated by women.
The lesson for American policymakers: Don’t be complacent. Past success does not guarantee a boost to entrepreneurship in the future, and stagnation – not to mention lagging behind in global competition – is a real possibility, in the absence of smart policy. We believe there is a need for a renewed focus on promoting entrepreneurship on both sides of the Atlantic.