Project on European Digital Innovation
About the Project
In the last 30 years, Europe — defined here as the EU plus the U.K., Norway and Switzerland — has created few leading digital businesses compared to the U.S. and China. This long digital winter is symptomatic of underlying problems that are behind persistent gaps between the U.S. and Europe in GDP per capita, output per worker and various measures of innovation. It is also a bellwether for other cutting-edge technologies. The European Commission has documented these problems periodically, since at least 2000, and called for reforms. None has narrowed much less closed the gaps.
The lack of digital innovation during an epoch in which most industries will be driven by digital, along with other cutting-edge technologies with similar trajectories, places European industries at risk of falling even further behind the U.S., China, and other surging economies. Viewed over the coming decades the situation is dire for Europe as the region faces other serious economic challenges including the steep decline in the working age population.
There is no airtight recipe for turning this around or even for proving the root causes of the malaise. The common rationales for Europe’s giving birth to so few digital and other startups often mistake cause for effect, such as the lack of venture capital funding. After all, one of Alibaba’s early investors was from Sweden. Other rationales cannot explain why Europe does so much worse than other parts of the world where, for example, successful startups such as Grab emerge — from Malaysia, which has fewer people than Spain — to serve highly fragmented regions.
The project aims to identify and analyze the common rationales for the lack of successful European digital innovation. Project works made the case that Europe would need to move to a greater reliance on markets, a stronger culture of risk taking, and a smaller appetite for regulation to reverse its long losing streak in digital innovation, which may extend to other critical technologies as well. Globally, digital innovations, and economic growth, have come largely from private investment, entrepreneurship, and market forces, even in China. The European Commission’s past initiatives, most recently in AI, provide insights into what has not worked for three decades now. It would be a profound mistake to repeat them and stick to the same path.
Links to Articles + Podcast
Podcast: Europe Needs to Focus on Solving Its 30-Year Innovation Problem, With David Evans. Robert D. Atkinson and Jackie Whisman, ITIF, September 9, 2024.
Why Can't Europe Create Digital Businesses? Posted to SSRN, May 2, 2024.
Why Europe Must End Its 30-Year Digital Winter to Ensure Its Long-Run Future, PYMNTS Opinion, April 18, 2024.
Can the EU Get Its Digital Act Together? PYMNTS Opinion, December 6, 2023.
Project Team
The Berkeley Policy Institute (formerly BRG Institute) Project on European Digital Innovation is supported in part by Google.