why Europe has a lot to learn...

Filed in archive Entrepreneurship on September 19, 2004

This Economist article is not brand new (in fact it dates back to 4.5 years ago - the height of the bubble) but the analysis why European start-ups face a thougher time then many US counterparts is still pretty much true. Europe ha changed in many ways in the last years but still lacks flexibility in mindsets and businesses...

"�Regulatory hoops for start-ups. Anyone wanting to start a company in Europe has to be patient and rich. On average, it takes ten times longer to set up a limited-liability company in Germany than in America, and costs three times more, according to UNICE. Once a company is off the ground, it should beware of contractual disputes, especially in Italy, where they take an average of seven years to settle through the courts. Moreover, working across borders in Europe remains horrendously complicated, says Mr Hudig."

"�The balance between risk and reward. In Europe, this is hopelessly skewed towards risk. For example, whereas in America bankruptcy is seen as part of the learning process, European entrepreneurs who go bust often do not get a second chance, as creditors are allowed to hound them for up to 20 years. Attitudes to stock options are an even bigger problem. These have become the most important tool for retaining staff at technology start-ups, but in Europe they remain blunted by punitive taxes. In France, an employee who makes a profit on his options would be lucky to pocket a third of his nominal gain. In Spain, the tax on options was raised after a public outcry over profits made by directors of the former telephone monopoly. So long as Europe�s governments continue to balance the need to compete for skilled labour against ideas of social justice, companies will be tempted to go elsewhere.

�Labour markets. Social charges are high throughout Europe. In other respects, the picture is mixed. Italy�s collaborazione labour contracts have made it relatively cheap and easy to hire and fire workers, or to take on part-timers, according to Domenico Siniscalco, an economist and board member of Telecom Italia. France and Germany have moved in the opposite direction, France with its 35-hour week and Germany by withdrawing social-security concessions on part-time jobs.

�Lack of co-operation between universities and companies. Compared with America, Europe has few research institutes with links to the business world. Moreover, enterprising academics suffer severe restrictions on the time they can give to business projects. Add to this a clash of value systems. Until recently, most European academics have seen their job as interpreting the world, and that of businessmen as exploiting it, and have drawn a firm line between the two, says Heinz Klandt, a professor of entrepreneurship at the European Business School."