European companies are losing the Tech race to the world
An insight into Europe, once an innovation powerhouse of the world civilization, is losing its innovation race to the rest of the world.
Europe has long been an innovative power house of the world since the first industrial revolution. It was the home of many great scientists and inventors who laid the foundation for our modern world’s technology. However, taking a look at the top technology companies and it is easily recognized the list is dominated by American and Asian companies. So why is this happening? Is Europe starting to lose their innovation?
There are 3 main problems that lead to downgrade of EU tech innovation: capital, culture and laws. Each of these criteria affect Europe’s ability to compete in the fast changing world today where there are thousands of new inventions introduced daily.
Capital
In terms of budget and money, American win hands down for the depth of their pocket. Being a leader in innovation since after the second World War until now, the total wealth of American has increased exponentially. This leaves American firms with more money to invest in startups and ideas, therefore gain the edge in the Technology race. Moreover, although sharing the same living standard as well as median income, the pay for top engineers in the US is much higher than in Europe [1]. Higher pay, with a better opportunity to advance their careers, leads to an advantage in this race for the US Tech firms over the European ones.
On the other hand, China also has advantages like the American did after World War 2 when almost half of the world manufacturing output is located within China border. This has brought back to them an enormous stream of revenue, and they have spent it wisely since. For the last 20 years, China has invested heavily into their technology sector, and their companies are now able to compete fairly with even the American ones.
The same reason can be applied to Japan when they have a huge economic growth after rebuilding their devastating country after the War. Japanese investment firm start to have more money in their pocket and start to reinvest, buying and owning many assets around the world. For example, Softbank, one of the biggest bank in Japan, has many of their money ties into big Tech company in Silicon Valley.
Culture
Personally, I would prefer work-life balance as what many European countries are doing right now, but for the purpose of this topic on why they are losing the Tech race, I’ll be focused on analyzing the problem.
In terms of culture, Asian have long been famous for their hard work approach to any solution. Since the Western culture values work life balance more, they don’t devote enough time to their job as compared to their Asian counterparts and hence, reduce their competitiveness on the world stage. Let just say, with the same ability, same intelligence and same resources then the things that will define a winner over the other will be how much effort they spend on the task.
Moreover, the attitude of Americans toward a failure of a startup is much more positive compared to Europeans.
Failure is usually seen as a stepping stone to the next successful in the States. This environment has created an entrepreneur mindset in the US for over generations and hence, many are willing to take risks to start and create something new for the market.
In Europe, on the contrary, failure is usually seen as lack of leadership ability. One with failure on their portfolio will be harder to find investment for their next startup if they decide to continue. This mindset has discouraged most young European taking risks and doing something new unless they are certain that their model will succeed.
As we all know, high risk yields high return.
Laws/Regulations
At last but not least, we cannot talk about economic growth without talking about all of the regulations in place.
The more regulations we put in place, the slower Technological advancement can progress. Since the antitrust laws in the US are not as harsh as in Europe, there are less restrictions to the growth of the Tech industry in the State than EU nations. This has led to the huge gap between the EU Tech giant and their American counterparts overtime.
Sources:
[1] Team, D. (2020, March 12). Software Developer Salary in the World: Software Engineer Salary by Country. Retrieved July 23, 2020, from https://www.daxx.com/blog/development-trends/it-salaries-software-developer-trends
