US and Europe Can Learn From Each Other’s Weaknesses to Strengthen Innovation for All
“Europeans just need to take more risks and become more entrepreneurial.” I heard this stated numerous times by both Americans and Europeans during my Marshall Memorial Fellowship experience in Europe. It applies to all sectors, but especially to the tech industry that I work in because so many tech entrepreneurs fail numerous times before they succeed. This is an industry that actually celebrates failure and equates it with learning.
This claim begs the question: why don’t Europeans take more risks? I argue it has to do with how they see the role of government. I visited Brussels, Amsterdam, Turin, Budapest, and Berlin as part of my Fellowship. Based on my conversations, I recognized a correlation between people’s perception of the role of government in society with the level of tech entrepreneurship. When people think positively of their government, they are much more likely to contribute to making the system work.
How do Europeans and Americans differ in their views of government? In many European countries, the government is there to provide for and protect people. In America, the government is there to protect the freedom people have to try to provide for themselves.
If the government in Europe provides a greater security blanket than in the U.S., you would think Europeans would take more risks because they have less to lose. They also have less to win because their government will provide regardless. In Belgium, Italy, and Hungary, many people don’t pay taxes because there are no consequences. Labor laws across Europe protect employees from getting let go for underperformance, which stunts small business growth. Contrast this with Americans who pay less taxes than Europeans because they get fewer social benefits.
How does government impact the tech industry? A strong, entrepreneurial tech sector requires active citizenship and tech talent. What Europe may lack in the former, it makes up for with the latter. Drawing from a higher tax base, European governments have invested more in their schools, making high quality education affordable to more people. The dichotomy between active citizenship and technical talent is particularly evident in Budapest, which is home to the EU-wide European Innovation & Technology Institute because of its concentration of locally-trained technical talent. There, the state tries to substitute private capital by providing public grants to entrepreneurs.
“The government looks like they are helping stir entrepreneurship,” said Gabor Bojar, a Hungarian tech entrepreneur. “But the work required to write a grant proposal and manage a grant is different from running a business, satisfying customers, and earning revenue. If these so-called entrepreneurs fail and can’t provide return on the investment, they don’t feel the sense of responsibility toward the state as they would if they had raised money from their friends and family. Because Hungary has a long history of being occupied, getting the most out of the state is considered brave and to not return the money is even braver.”
On the other end of this spectrum in Europe, the Netherlands and especially Germany have active citizens and strong tech industries. While the government provides R & D tax credits and small innovation grants, entrepreneurs still must run their business on private investments and revenue.
What does this mean for transatlantic cooperation? Each side of the pond should be learning from each other’s weaknesses. The U.S. has weak schools and strong active citizenship. Europe has strong schools and weaker active citizenship.
The biggest challenge facing the tech industry in the U.S. is the shortage of tech talent. We can’t train software developers fast enough to fill open jobs. In my home state of Washington, Washington Technology Industry Association reports that jobs are growing 10 times faster than the state is producing software engineers. Tech talent is a challenge everywhere, but it’s not Europe’s biggest challenge. Training is easier than retaining for some European countries like Hungary and Italy, which lose their engineers to companies abroad. The U.S., Germany, and the UK are benefiting from the brain drain experienced in other European countries.
Telling Europeans to just take more risks is unfair to them. It also underestimates the role of active citizenship in contributing to innovation in the U.S. Building high quality, widely accessible schools and changing people’s expectations of their government both take time. To further innovation for all, the U.S. and Europe, as world leaders, need to address these weaknesses.
The views expressed in GMF publications and commentary are the views of the author alone.