European “unicorns”: entrepreneurship’s aspects

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Most often organizational form for business in Europe is actually SMEs; however big innovative companies, so-called “unicorns” are vital as well. It is them that often provide occupation for SMEs. There are presently sufficient data on European unicorns in geographical and sectorial distribution, including their locations, companies’ age and the ways they acquired a unicorn status. The analysis takes the form of a comparative study of unicorns from the EU, China and the United States. 

The EU’s business “reform barometer” outlines that there is a continuing lag among EU regions on key indicators such as R&D investment, fast broadband and educational performance, addressing existing challenges of the twin transitions and an ageing population requires a greater focus on competitiveness. This includes more efficient public spending, e.g. with the support and use of the EU recovery and resilience instruments to deliver effective investment and reform, as well as developing tax systems that support investment and growth.
There are already some research papers that provide insights into the geographical and sectorial distribution of the EU unicorns; the latter term is used to depict venture capital and start-up companies with a value of over one billion USD.
The Unicorn club data from Dealroom up to mid-2021, explores in a comparative study location, age and transition to the unicorn status among the unicorns from the EU, US and China.
Comparing unicorn’s main dimensions (locations, the age of companies, the unicorn status and the overall amount of financing raised by the time unicorn status is attained, etc.) the Dealroom also profiles top investors in European unicorns and their acquisition strategies. Besides, it looks at the unicorn founders in terms of gender, place of origin and educational background. Finally, it discusses the role of government intervention, in particular of the European Innovation Council, in supporting the development of fast-growing companies.


Innovation and research in critical times
Recent BusinessEurope’s 2022 Reform Barometer shows that present pandemic has coincided with a substantial surge in global innovation and entrepreneurship. Thus, last two years have seen the emergence of more new “unicorns” than during previous five years, funded by a more than doubling global venture capital.
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The ability of long-standing companies to adapt their business models in light of the pandemic, including to deliver life-saving drugs and equipment, and to adopt on-line operations, has been similarly impressive. According to the EU’s Industrial Science and Technology Investment Scoreboard, about 2500 highest research and development investing companies globally, rather than cutting research activity, actually increased investment by over 6 percent (besides, the number of registered patents and trade-marks were also increasing).
In each of these areas the EU big companies moved forward, but they need to avoid losing ground to other regions in the world: e.g. over 500 unicorns emerged in the EU during the pandemic compared to over 1500 in Asia and over 2000 in the USA.
Successive shocks and crises have shown the importance of building more resilient economies, particularly with regard to energy supply; e.g. about 40 percent of EU gas imports currently is coming from Russia. Hence, the member states have to urgently develop and implement a coordinated plan to decrease energy dependency, diversify supply sources and better exploit existing energy resources, including through a strengthened EU-wide internal energy market and accelerated deployment of renewable energy and energy efficiency projects.
The EU member states’ public finances, already weakened following covid, will face further pressures: e.g. through increased defence expenditures as seen in Germany, which has already committed to increasing defence expenditure from 1.4 to 2 percent of GDP. There will also be substantial costs to absorbing and integrating refugees, both a moral imperative, and a positive response to the EU’s tight labour market. The think-tank Bruegel suggests that total discretionary spending, including addressing rising energy price and security issues, could represent €175 billion or about 1.25% of GDP in 2022 with long-term pressures of around 0.5%.
Macroeconomic policy makers will be walking a tightrope in the coming months. The European Central Bank, having already raised its 2022 inflation forecast from 3.2% to 5.1% following the Russian invasion, will need to be vigilant to rising inflation expectations whilst at the same time seeking to avoid a sharp reduction in stimulus. Similarly, fiscal policy will need to properly support impacted workers and businesses, whilst at the same time help ensure Member States take action to strengthen public finances in the medium term.
The pandemic has shown that our entrepreneurial and innovate capacity is as strong as ever. But these forces will only be fully unleashed to deliver the transformational response in terms of investment and consumer behavior the green deal, in particular, will require, if we ensure that markets provide clear and stable price signals to investors and households alike. Both Member States and the Commission would do well to keep prospects for investment at the very front of their thinking in the current debate around windfall taxes.
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Business in post-pandemic period
Following the impact of the COVID-19 crisis on growth, investment and output in the EU, including Russian-Ukraine military conflict, there is a clear evidence of additional challenges to the EU economy. With increased pressure on energy prices, inflation and public finance, it is essential that the EU’s coordinated fiscal stimulus through the EU’s Recovery and Resilience Facility (RRF) is fully exploited as a once-in-a-generation opportunity to transform the EU economy and boost long-term growth in the EU.
While there are already some tentative positive prospects for the implementation of the recovery plans revealed in implementation of the country-specific recommendations (CSRs) under the European Semester: e.g. in 2021 about 34 percent of states satisfactorily implemented CSRs, compared to just 13% two years ago; it suggests that European RRF does help.
Speaking at the Tripartite Social Summit conference in March 2022, the BusinessEurope President Pierre Gattaz highlighted that European global strength comes from its economic power. Hence, it is vital that the EU states watch carefully socio-economic development and address the “secondary effects’ of the present crisis: e.g. inflation, energy and raw material price increases and supply shortages, supply-chain disruptions, etc. In particular, the EU states urgently need to strengthen the internal energy market, diversify energy supply sources and provide an adequate framework to scale up the necessary public and private investments.
Together with the “twin transition”, the states also need to elaborate national perspective and realistic energy policies involving social partners when defining measures to support businesses, enterprises and workers. The upcoming European Commission’s social dialogue is regarded as a golden opportunity to foster unity among the states by improving cooperation between public authorities and social partners.

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