Europe is behind in entrepreneurship particularly amongst women

Historically, Europe has been a global leader in technology and entrepreneurship. Today some European countries such as Switzerland, Cyprus, Sweden, Ireland, and the UK do have many superentrepreneurs. But while five European countries rank as having the highest concentrations of superentrepreneurs, per million adult citizens, Europe as a whole has fallen behind significantly.

ECEPR with funding from Nordic Capital, undertook a project to study high-end entrepreneurship, with 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 such superentrepreneurs, we can understand better which countries are more supportive of free enterprise.

France, Spain, Italy, and Germany, have a deficit of superentrepreneurs. The same is also true of Eastern European and Southern European economies, which largely lack the market size for creating highly successful enterprises. In total Europe has only 0.8 superentrepreneurs per million adults, compared with 0.9 in China. The US is far ahead of Europe, with 3.1 superentrepreneurs per million adults.

This is worrying, for a lack of superentrepreneurs means that Europe is behind when it comes to new highly successful enterprises, which push for technological change and create jobs. 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”.

Europe is in particular far behind in women amongst the most successful entrepreneurs. Internationally, only around one in twenty of the billionaire self-made entrepreneurs are women. A comparison of large regions shows that India is last, with merely 2 percent of the superentrepreneurs being women. Europe does only slightly better, with only 3 percent of superentrepreneurs being women, compared to 4 percent in the USA, 5 percent in Central and Latin America, 7 percent in Africa, and 8 percent in China.

If we look at the total numbers, there are as few as 8 self-made billionaire entrepreneurs that are women in Europe, compared to 29 in North America and 81 in Asia. There is an important paradox to explain this. European countries have values that are gender-equal, but also economic policies which make it difficult to have large and growing profit-making businesses in women dominated parts of the economy, such as health care, education, and elderly care. Other parts of the world, such as China, have much more openness for profit-making businesses in these welfare sectors. This is why otherwise gender equal Europe is particularly far behind in women’s entrepreneurship.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 women-dominated fields of the economy. These steps are needed for Europe to catch up in high-end entrepreneurship. Opening up to entrepreneurship in general, and particularly amongst women-dominated parts of the economy, is a key European challenge.

Written By Dr. Nima Sanandaji

Director of European Centre for Entrepreneurship and Policy Reform