Europe’s deep creativity crisis – and how to fix it

In Europe, small companies don't become big as they do in the US. Why is that?

Former European Central Bank President, Mario Draghi
(Image credit: Thierry Monasse/Getty Images)

Europe is undergoing a crisis of creative confidence. The recent report by Mario Draghi, the former president of the European Central Bank, on Europe’s competitiveness revealed a poor innovation record. He noted that “EU companies spent around €270 billion less on research and development [R&D] than their US counterparts in 2021, largely because we have a static industrial structure dominated by the same companies and technologies as decades ago”.

His solution was to focus on more venture capital (VC) investing in high-risk projects, as a lack of VC has meant start-ups have been more reliant on bank loans, which are unsuited to financing such ventures. He noted that “the core problem in Europe is that new companies with new technologies are not rising in our economy. In fact, there is no EU company with a market capitalisation over €100 billion that has been set up from scratch in the last 50 years. All six US companies with valuations above €1 trillion have been created in that period of time. Innovative companies that want to scale up in Europe are hindered at every stage”.

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David C. Stevenson
Contributor

David Stevenson has been writing the Financial Times Adventurous Investor column for nearly 15 years and is also a regular columnist for Citywire. He writes his own widely read Adventurous Investor SubStack newsletter at davidstevenson.substack.com

David has also had a successful career as a media entrepreneur setting up the big European fintech news and event outfit www.altfi.com as well as www.etfstream.com in the asset management space. 

Before that, he was a founding partner in the Rocket Science Group, a successful corporate comms business. 

David has also written a number of books on investing, funds, ETFs, and stock picking and is currently a non-executive director on a number of stockmarket-listed funds including Gresham House Energy Storage and the Aurora Investment Trust. 

In what remains of his spare time he is a presiding justice on the Southampton magistrates bench.