Europe’s slow growth is often attributed to its low capacity for structural change and shifting towards new growth areas. New firms fail to play a significant role in the innovation dynamics of European industry, especially in the new growth sectors. This is illustrated by their inability to enter, and more importantly, for the most innovative entrants, to scale-up and grow to world leadership in new sectors. Europe is missing its GAFAs (Google, Amazon, Facebook, Amgen).
The specific barriers faced by these companies in the EU need to be addressed. An important barrier is access to external finance, particularly early-stage risk capital.
What role is there for policy to address the funding barrier for scaling-up? Do we need a reorientation of the currently pursued policies in European countries? Do we need more public risk funding? Or does it matter more how “smart” the funding is, assuring that the financial markets allocate risk finance to the most promising projects.
