Europe must embrace micro-multinational enterprise
Europe should create a culture for growth, gearing education and university systems towards technological innovation and micro-entrepreneurship, writes Anna Darmanin.
Anna Darmanin is vice president of the European Economic and Social Committee.
"Despite the economic malaise that has gripped both Europe and the world in recent years, it could be argued that there has never been a better time in history to be an entrepreneur and start a company.
The web makes it possible, with virtually no infrastructure, for products or services to gain immediate access to international markets. The tools that large corporations used to pay large sums to develop - such as internal communications, supply chain management and relationship management software - can now be obtained from web- based providers from as little as some €15 per month.
These small and agile corporations are becoming known as micro-multinationals because of their ability to structure themselves and service markets internationally. According to Nesta, a UK based charity, the fastest growing 6% of companies between 2002 and 2008 created half of all new jobs in the UK. Other studies have shown similar results – that is to say, that a significant proportion of job creation and prosperity within an economy is being created by a small group of the fastest growing companies.
When a company can operate internationally - or perhaps even globally - from day one, its chances of high growth rates are very different from those of a company that was formed just 15 or 20 years ago. I believe that these micro-multinationals can and should play a major role in the economic future of small nations.
Not only are many of these companies able to compete internationally, but they can also compete with the largest of the global players. In many ways, the internet has levelled the playing field in most markets. In fact, it can be argued quite easily that the smaller company has many advantages. For example, where many small companies can start a highly focused blog and provide a social media presence to promote their products or offer online services and help to solve a problem, many larger companies are slowed down by internal rules, management decision-making and bureaucracy. In such a world, the smaller companies are the future.
High-growth companies expand quickly by definition. To keep up with their growth, they typically need to hire staff quickly. Among the fastest growing companies, it is not unusual to hear of them doubling their number of employees in one year, a feat that few large companies could ever attain. These new employees are people who will rent or purchase properties, drive cars, eat in restaurants, shop locally and pay their taxes.
There seems to be no good reason why many parts of the world cannot be more accommodating to start-ups. We all know that Silicon Valley and London are two of the most recognised locations in this respect, but Israel is one of the world's premier entrepreneurial spots and worth taking the trouble to understand.
Rather than simply hoping for high-growth companies, Israel has created something of a national culture for growth. Both their education and university systems are geared towards technical innovation. Their university students are strongly encouraged to mix subjects and disciplines, so that technical people learn about business and business people learn about technology. The university system has even gone so far as to invite angel investors and venture capitalists on to campus every week in some universities to provide the opportunity for ideas and funding that can easily be followed up. For ambitious young students with an idea, an Israeli university can double as a business incubator.
These are the types of coordinated steps that, over time, filter through so that new graduates are starting and growing companies every year. It could almost be described as a production line for innovation.
I believe that it is this sector of the global economy that smaller nations need to work hard to attract. If any nation is able to create a culture where start-ups, explosive growth and increasing employment are the norm, it is difficult to imagine how this could not be of great benefit to everyone. The impact of such a culture would be magnified in smaller nations, thus enabling prosperity to be shared more widely throughout the community.
It is easier for small countries to make some of these structural changes that will promote more risk-taking and entrepreneurship. I am not suggesting that larger countries should not take action to encourage high-growth firms, merely that the results will be likely to be more pronounced and achieved more quickly in smaller nations.
Not only should such actions be encouraged, they are absolutely essential. A report released by Eurostat on 3 December showed that almost a quarter of all Europeans were at risk of poverty or social exclusion in 2011. It is unacceptable that such a large portion of the population is being left behind.
If we value our social model as Europeans and believe in equality at every level, then it is vital that a great many radical steps are taken. We must do everything possible to inject a culture of economic growth into our schools, universities, governments and lives so that we are able to provide much more than the bare minimum for everyone in society."