The continent has educated talent, a huge population, and massive wealth. It also has rigid labour laws, crushing tax systems and a bias against risk-taking.
It’s easy to blame “structural rigidities” for what is perceived today as a lack of competitiveness in Europe. But that is only a small part of the reality which businessmen see as impediments to economic growth, according to panellists gathered at INSEAD’s second annual Global Business Leaders Conference – “Europe: Converging on Competitiveness.”
“Mindset” is one drawback, according to Admiral Insurance CEO and founder Henry Engelhardt (MBA’88), himself an entrepreneur who started up the unorthodox insurance company two decades ago, breaking into new markets as a result . “The mentality in the European Union is different from, say, the mentality in the U.S.,” the Wales-based American told conference attendees in Paris. “Entrepreneurs are celebrated in the U.S.; not so in Europe. The French hate failures, but they also hate success.”
Venture capital investors would tend to agree: their return on investment (ROI) over the past three decades in Europe has been in negative territory, down about 4 percent. EU labour laws are one reason why businessmen say it’s difficult to replicate the Silicon Valley – with its unique ecosystem of university, venture capital and start-ups which attract global talent. But there are cluster cities within Europe (Paris, Cambridge, London, for example) which are fertile ground for development.
In Europe, it is the “mittelstand” or mid-sized- companies where growth occurs. Twenty-nine percent of EU companies are in this size category; 35 percent of French exports come from companies of this size. Armor Group, an international industrial group based in Nantes, France, is one of them. Its CEO, Hubert de Boisredon, told the INSEAD conference he competes in today’s high-cost, low-wage industrial production environment through innovation.
“I managed to triple production output with the same number of people by investing in new machines and re-training the workforce,” he claimed. “This also changed our relations with the trade unions: it had been hostile since 2004 and now – by investing in innovation and productivity – we have a collaborative relationship.”
De Boisredon thinks accounting rules, particularly in France, could be changed to allow smaller companies and start-ups a bit more “wiggle room” as they build their businesses. He’d like to see EU countries promote the “entrepreneurial spirit” and grant “permission to fail.”
Thierry Breton, former French finance minister, now chairman and CEO of international IT services company Atos, agrees. He believes it’s a key way out of the global recession and one way to employ Europe’s young workers, reeling from unemployment rates as high as 50 percent in some EU countries. “We have fantastic young people,” he told the INSEAD conference. “My problem is how to keep them here in Europe. But when you are a CEO in Europe, you can deal with adversity. There is lot to do, and we have demonstrated since World War II that we are able to rebuild and to bring the world together. It takes time. But we WILL do it.”