🔔 What does innovation look like?

For, as much as European leaders embrace innovation, they have a decidedly ambivalent view of it. When they refer to innovation, they rather seem to mean science- and technology-based funding, not innovation in Schumpeterian terms.

For innovation is the constant transformation of an economy and its institutions. And some countries in Europe seem to be reluctant to accept constant transformation, especially if it has the potential to upset the delicate balance of carefully calibrated social democratic societies.

Put simply, even though Schumpeter was a European, most Europeans are not Schumpeterians.

Europe wants the benefits of a knowledge-based technology economy without the creative destruction that not only accompanies it, but is required to achieve it.

Unless Europe embraces the idea that innovation entails plant closures and job losses, new technologies with uncertain social or environmental impacts, and new kinds of business models and organizations, it will be challenging for Europe to keep up in the race for global innovation advantage

The United States maintains the world’s most vibrant innovation culture, where risk and failure are broadly tolerated, inquiry and discussion are encouraged, and the government’s role in business plays a less prominent role (’The U.S. is not a country, it’s a business’, Dominik, 2012) and science and technology – though perhaps not all their consequences – are broadly embraced.

American culture rewards success. These ingredients have contributed to the rise of fifty-two new large companies in the United States over the past sixty years, compared to Europe’s twelve, as well as America’s being the home of many of the world’s most innovative entrepreneurial companies today

Elements in the European innovation culture that need improvement: a simpler regulatory environment, a broader availability of risk capital, and more tolerance of risk and change being critically important. Europe is clearly lagging the United States in risk capital, which has allowed the United States to quickly grow some of its young firms into global leaders. Also, if startups are financed through risk capital, bankruptcy aspects are less prevalent, because they don’t have to take out loans from inherently risk-averse banks, which will lend you money if you can prove that you don‘t need it or if you bet your house, which if you lose when the companies fails, stigmatizes the entrepreneur further...