Yet changing circumstances may require a new approach. One difference is that economic growth is back in focus. Last year Ursula von der Leyen, the commission’s returning president, asked Mario Draghi, a former head of the European Central Bank, to write a report on the continent’s waning competitiveness. The resulting tome pointed to Europe’s weakness in tech as a cause of its woes.
Heavier regulation might not help, but as I have repeatedly commented before, I believe that the dominant difference between the EU and US on large, business-to-consumer tech companies, the reason that the US has had more startup tech companies that grew to become giants, is not heavy regulation in the EU, but rather market fragmentation in the EU.
The EU has companies that make tech products. What it doesn’t have a lot of is large business-to-consumer tech companies that started in the EU.
A lot of those large business-to-consumer tech companies have large fixed costs, and small variable costs. Whether Google has one customer or a billion customers, they still have to pay their engineers to create their products; that’s a fixed cost. They just need more servers as they scale up. For a company with large fixed costs, being small is really bad, as you still have the large fixed costs, but you don’t have the revenue from many customers. That means that scaling up quickly is important. The US has a comparatively-homogenous market, so it’s easier to quickly go from zero to a fairly saturated domestic market.
The report mentioned in the above quote from the article that Draghi put out also mentioned market fragmentation as an issue.
Heavier regulation might not help, but as I have repeatedly commented before, I believe that the dominant difference between the EU and US on large, business-to-consumer tech companies, the reason that the US has had more startup tech companies that grew to become giants, is not heavy regulation in the EU, but rather market fragmentation in the EU.
The EU has companies that make tech products. What it doesn’t have a lot of is large business-to-consumer tech companies that started in the EU.
A lot of those large business-to-consumer tech companies have large fixed costs, and small variable costs. Whether Google has one customer or a billion customers, they still have to pay their engineers to create their products; that’s a fixed cost. They just need more servers as they scale up. For a company with large fixed costs, being small is really bad, as you still have the large fixed costs, but you don’t have the revenue from many customers. That means that scaling up quickly is important. The US has a comparatively-homogenous market, so it’s easier to quickly go from zero to a fairly saturated domestic market.
The report mentioned in the above quote from the article that Draghi put out also mentioned market fragmentation as an issue.