Europe is embarking on a transformative journey toward revitalizing its economic landscape. With regulatory simplification gaining momentum and public investment accelerating in key sectors such as technology, energy, and defense, the continent is taking substantive strides toward renewal. However, a crucial element is still missing: a heightened focus on entrepreneurial courage.
Emphasizing entrepreneurial courage for competitive advantage
Recent research underscores the need for Europe’s leading enterprises to adopt a bold approach to risk-taking and embrace uncertainty as they pursue growth. Corporate leaders who are prepared to make daring investments and engage in innovative public-private partnerships—similar to their counterparts in the United States and Asia—stand to benefit significantly from decisive actions taken with urgency.
“The status quo is not tenable.”
Europe’s global competitiveness hinges on the actions of individual companies, particularly large corporations and dynamic scale-ups. It is not necessary for a multitude of firms to act boldly; rather, even a select few can create a considerable impact. For instance, an analysis by the McKinsey Global Institute revealed that over two-thirds of productivity growth in the U.S. economy from 2011 to 2019 was driven by just 44 standout companies. Similarly, 13 exceptional firms were responsible for a comparable share of productivity growth in Germany during the same period. These high-performing outliers contribute to significant valuation disparities between European firms and their international counterparts, as evidenced by recent studies on the UK capital markets.
Investment disparities hinder growth
The European economy has faced a prolonged slump in private investment since the global financial crisis, with particularly severe effects in future-oriented industries. Data shows that U.S.-based companies have invested €2 trillion more in digital technologies like artificial intelligence than their European rivals in the past five years. Additionally, China outpaces Europe in traditional manufacturing investments at a ratio of three to one.
This investment gap not only hampers economic growth but also restricts Europe’s ability to innovate and develop the technologies necessary for boosting productivity and enhancing prosperity. The urgency for increased investments was highlighted in the 2024 Draghi report, which estimated that an annual mobilization of €800 billion is required to begin bridging the competitiveness gap. With added defense needs, this figure has surged to approximately €1.2 trillion annually over the next five years.
While the regulatory framework is crucial, recent developments are promising. The European Commission has rolled out numerous initiatives aimed at regulatory simplification, funding enhancement, and market creation. Furthermore, the introduction of a potential ‘28th regime’ seeks to facilitate scaling for companies across its 27 member states. Governments are also increasing their strategic public investments in technology and energy; for example, Germany has amended its constitution to allow defense spending above 1% of GDP to be exempt from its debt ceiling and has established a €500 billion fund for infrastructure and climate-neutral investments. Similar initiatives are emerging in France, Italy, the Netherlands, and Nordic countries.
Nevertheless, while there are signs of renewed private sector activity, much more is needed. It is essential for standout companies to emerge, working both independently and collaboratively with the public sector to drive Europe’s economic vitality. Failing to do so risks locking the continent into another decade of ‘secular stagnation,’ characterized by sluggish GDP growth of approximately 1% per year, as excess savings and insufficient investment dampen aggregate demand and push interest rates toward zero.
What does it take to foster greater entrepreneurial courage? Insights from global research and the practices of standout firms suggest various avenues for leaders to explore.
One notable example is ASML, a semiconductor manufacturer, collaborating with the Dutch government and regional partners on Project Beethoven, a €2.5 billion public-private investment to solidify ASML’s presence and bolster the microchip cluster in Eindhoven. Another instance involves European utilities repurposing former coal and gas power plant sites for hyperscale data centers, effectively reinventing stranded assets for future industries. Moreover, the radical adoption of AI and automation technologies could potentially add as much as 3.4 percentage points to global annual productivity growth by 2040, according to MGI’s research.
Europe stands at a pivotal moment, with opportunities to significantly reshape its competitive landscape. While public sector leaders can lay the groundwork for accelerated investment and growth, the continent’s foremost companies are uniquely positioned to enhance these efforts, contributing fundamentally to Europe’s prosperity, security, and strategic autonomy. There is a growing consensus on the necessary actions; what is now required is a substantial infusion of entrepreneurial courage to take decisive steps forward.