Europe desperately lacking 'positive entrepreneurship culture'
The EU must work towards changing its attitudes towards entrepreneurship and create a positive culture which encourages people to take risks, argued participants in the annual Microsoft SME day, which explored ways to make European SMEs flourish globally.
In a debate hosted by Microsoft during its fourth annual SME Day in Brussels on 12 June, entrepreneurs and policymakers exchanged views on how to promote European entrepreneurship and turn European start-ups into global star performers.
Under discussion were the main barriers to entrepreneurship in general:
- Overly-complex business regulation and red tape;
- the lack of positive entrepreneruship culture and acceptance of failure, and;
- an insufficient financing framework around start-ups.
Small and medium-sized enterprises represent 99% of all companies in the EU. They are the biggest sector of the EU economy, with 23 million enterprises employing around 75 million people. Responsible for the creation of one in every two new jobs, SMEs also produce considerably more than half of the EU's GDP.
In November 2005, the Commission committed itself to improving the business environment for these companies with a new SME policy, entitled "think small first" (EurActiv 10/11/05) and aimed at:
- Promoting entrepreneurship and skills through education and training;
- improving the access of SMEs to markets, especially in the area of public procurement;
- simplifying legislation for SMEs, with longer transition periods, reduced fees, simpler reporting and in some cases, exemptions from EU rules, and;
- improving the growth potential of SMEs, with support for participation in the 7th Research Framework Programme and help in the field of intellectual property rights.
The Commission is currently finalising a Communication on the Small Business Act (SBA), proposing a series of actions to make starting up a business in the EU easier. SMEs have heavily criticised the initiative for not addressing the key question of whether or not it should be binding for the 27 member states.
EU Education Commissioner Ján Figel' emphasised the role of education in boosting entrepreneurship in Europe. "We need to create conditions for access to quality education and lifelong learning (LLL), open educational system for non-traditional learners and link research, education and innovation in general. We also need to promote creative thinking in kids' minds, teach them ability to learn, sense of initiative and capacity to take responsibility to turn ideas into action."
However, this approach was challenged by the chair of the Finnish software entrepreneurs' association (Ohjelmistoyrittäjät) and CEO of Digium, Matti Heikkonen. He said entrepreneurship is not an educational issue. "You can't teach a person how to become an entrepreneur," he said. He argues that most entrepreneurs are not those with the highest university qualifications and perfect diplomas, precisely because the better qualified the person, the more risks linked with turning ideas into action he or she will see.
According to Heikkonen, entrepreneurs are often generalists who have dropped out from university, who just have an idea they want to realise and go for it, without spending time calculating risks and fearing failure. Although he argued that one cannot teach people how to become entrepreneurs, he sees a role for the education system in helping "to change attitudes towards entrepreneurship in general and to show both success stories and failures" without necessarily explaining in detail how everything was done nor giving adivce on how something should be done.
He also challenged the common view and belief that knowledge creates growth. On the contrary, "growth creates knowledge," he said. This, he explained, happens when an entrepreneur has an idea and tries something, or when a market has not been explored yet. Once the venture proves successful and the entrepreneur has learned how the market functions, others are attracted to do the same, leading to even more knowledge on the issue.
Asked whether future global leaders and entrepreneurs are born or made, the president of Microsoft International, Jean-Philippe Courtois, said successful entrepreneurs are immediately ambitious, with the drive to go global from the start. "They take risks, have failed before and are good at attracting talented scientists and other people around them."
"Selling is the name of the game and start-ups should think globally from the start. The Northern countries are generally good in this, as they think and recrute globally," added Courtois.
"Numbers of start-ups are going down in Europe and up elsewhere in the world. In the United States alone, some 495,000 new businesses were started each month in 2007, that makes six million in total," said Peter Jungen, co-president of the SME UNION, "angel investor" and former president of Business Angels Network (EBAN).
He added that business angels invested some €24 billion in the US and only 200-300 million in Europe, but argued that the European figures could also be higher if there were more entrepreneurs. Even if access to financing is considered a key challenge for European start-ups, "venture capitalists would invest in Europe as well if there were enough entrepreneurs and start-ups fulfilling the conditions to diserve the funding".
Entrepreneurship is a lifestyle and Europe needs a 'winner culture' and "more importantly, a failure culture" so that Europeans move from considering failure as a stigma to considering it as a learning process, as is the case in the US, Jungen argued.
Europe also needs "a youth-protection law for start-ups - not to protect them from competition from other start-ups but from governments and bureaucracy," he added.
"Public authoritites don't create jobs, except for the public sector," noted Hugh Morgan-Williams, the vice-chair of Businesseurope's SME Committee. "They create framework conditions for businesses to create jobs."
"SMEs represent 23 million businesses in Europe, and regulation affects small firms first," Morgan-Williams said. Therefore, national and EU authorities should "think small first and keep it simple" when creating regulation. "What is good for small business is good for the rest as well," he added.
- Early July 2008: Commission to present Communication on 'Small Business Act'.
- 2009: European Year of Creativity and Innovation.