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New from the DEEP Centre: Creating European Digital Technology Champions

The DEEP Centre is pleased to launch a new report outlining how Europe can strengthen the enabling conditions for creating global technology champions. Entitled “Boosting E-Commerce in the Digital Single Market,” the report was commissioned by the European Parliament’s Committee on Internal Market and Consumer Protection which invited DEEP Centre president and co-founder Anthony D. Williams to reflect on how Europe can better position itself to become a powerful launching pad for truly world-changing technologies and companies.

Boosting E-Commerce in the Digital Single MarketEuropean business leaders and policymakers have long lamented Europe’s apparent inability to foster the creation of global technology champions like Apple, Amazon, Facebook and Google. In fact, in a ranking of the top global Internet leaders by market valuation, there is not a single European firm in the top 20, a list which is dominated almost exclusively by Chinese and American Internet companies.

Research seeking to explain Europe’s relative underperformance has highlighted the presence of significant national fragmentation in the market for e-commerce and digital services as a key reason why European startups struggle to realize the true potential of the continent’s market of 500 million consumers. Although half of European retailers are online, only 21% sell in other EU member states and those who do limit their exports to a few countries, with the European average being 1.8 territories per company.

European efforts to boost cross-border commerce have centred on eliminating a long-list regulatory barriers that inhibit the ability of digital startups to offer their services across the continent. These hurdles include the need to comply with a patchwork of 28 different legal regimes and varying VAT obligations, expensive and unreliable cross-border shipping, inconsistent copyright laws and burdensome country-by-country restrictions on digital content like streaming movies and TV shows.

The DEEP Centre’s report takes a critical look at Europe’s efforts to create a Digital Single Market (DSM) in which digital goods and services can move seamlessly across the 28 member nations under the same set of rules. The proposed single market for digital services would create uniform rules that protect intellectual property, safeguard consumer data, eliminate mobile-phone roaming charges and end discriminatory practices such as geo-blocking digital content. The European Commission estimates the DSM would contribute €415 billion to the European economy, boosting jobs, growth, competition, investment and innovation.

While the benefits of a seamless and fully-functioning digital market are not in dispute, the DEEP Centre argues that market fragmentation and regulatory barriers in Europe are not the only —  or even the most significant — hurdles that entrepreneurs face in building viable growth companies. A growing body of research suggests the more intractable inhibitors to growth are related to the ability of firms to access a full spectrum of risk capital, acquire anchor customers and attract the sophisticated management talent to lead key corporate functions such as international sales, marketing and business development. Most of these issues have been entirely overlooked in the European Commission’s strategy for the Digital Single Market.

“For Europe to become a creator of global technology champions,” says Williams, “European policymakers must not only prioritize much needed regulatory reforms; they must also establish a series of entrepreneurial building blocks required to enable its highest-potential companies to grow beyond Europe’s borders and become the significant global employers of tomorrow.” Among other things, the DEEP Centre points to the need for an ample supply of growth capital; access to anchor customers and sophisticated management talent; and well-coordinated supports for scale-ups and internationalization.

“After all, Europe will not realize the full benefits of eliminating barriers to cross-border commerce,” says Williams, “if, in reality, few of its firms can acquire the capital, management talent and market sophistication required to reach scale without relocating their operations to leading tech-hubs such as Boston, New York or Silicon Valley.”

Download the full report here.

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The Centre for Digital Entrepreneurship and Economic Performance turns research findings into practical insights and tools for stimulating innovation, entrepreneurship and job creation.