By Dr Adem Kumcu, President of UNITEE – The New European Business Confederation
When future economists and researchers will look back at the years we are living, will they consider the current explosion of digital technologies as a new industrial revolution? One thing appears clear, even to us, standing in the midst of changes: technological advancements of recent years have introduced radically new business models, ranging from the sharing economy to the internet of things. If these developments, unprecedented in scale and impact, have had disruptive effects on existing businesses, they have also opened new opportunities for old and new entrepreneurs to pick up.
It is a truth that, for the EU economy to grow again and be able to govern these changes and go back to the much-desired growth, it has to look at creating a healthy and thriving business environment, focused on manufacturing of goods and services: it is from competitive business that true innovation can come.
In particular, the key asset for the European economy’s competition comes from its huge network of small and Medium-sized entreprises (SMEs). Its overwhelming contribution is represented by their number: 23 million SMEs represent 99% of all businesses in Europe, employing more than 90 million people. But there is still more to SMEs: since the beginning of the crisis, 85% of all new jobs have been created by small and medium-sized enterprises. This contribution is not only overwhelming: it is strategic.
And it is to be saluted that as such it has been recognised by the European Commission, with its pledge to adopt a ‘think small first’ approach in all its legislation and the creation of a series of tools, such as COSME, to help SMEs grow and internationalise.
It is neither the objective nor the scope of this article to go in depth into the importance of SMEs. But in my role as President of UNITEE, the New European Business Confederation, I would like to stress the particular significance of one specific kind of enterprise creation: migrant entrepreneurship. Indeed, even if they fit in the broader group of SMEs, thus sharing most of the problems and challenges with them, migrant – or to better say, ‘New European’ – entrepreneurs have peculiar issues of formation, growth and development and are therefore a demographic group offering multifold opportunities for the well-being of the European economy and society.
First of all, contrary to common beliefs, New Europeans tend to be more entrepreneurial and innovative than their native counterpart. According to a survey realised by Centre for Entrepreneurs, a British think-tank dedicated to the study of entrepreneurship, 17,2% of non-UK citizens have started their own business, compared to only 10,4% of UK nationals. These enterprises employ 1,16 million people, accounting for 14% of all UK companies. In other countries data are not as available as in the UK, but the general pattern that points to higher rates of entrepreneurship is clear. It is clear how this numbers represent a very interesting opportunity, for a European Union in need of jobs and innovation.
The second aspect of interest lies in their ability to open new markets. According to the OECD, developing and emerging markets are expected to account for 60% of world GDP by 2030. They represent therefore significant opportunities for European companies. However, according to data from the European Commission, at the moment only 13% of EU SMEs are internationally active outside the EU through trade, investment or other forms of cooperation with foreign partners. On the other hand, New European entrepreneurs are positioned to fare better as far as internationalisation is concerned: first of all, they speed the flow of information thanks to their knowledge of the local culture and their connections. And second, for the same reasons, they foster trust. And trust matters in business, especially in emerging markets where the rule of law is weak.
The third point to consider about the contribution of New European entrepreneurs is indirect, but potentially with longer term effects. The terrorist attacks of last November in Paris have plunged Europe in a situation of fear and mistrust, putting integration – or the lack of it – at the centre of public debate. In this situation, New Europeans have a dual role they can play in helping integration: first, by establishing their business they create positive externalities in their communities, creating jobs and revitalising neighbourhoods that otherwise would remain depressed or isolated. In turn, this local development can help alleviate the social issues that more often than not contribute to radicalisation. Connected to this is the second, more indirect, form New European entrepreneurs can facilitate integration: they can act as role models in their communities and beyond, advertising for entrepreneurship as a possible career move among recent migrants; this can be a way to push unemployed or marginalised individuals beyond initial situations of scarcity.
Notwithstanding the huge potentials for a smart, sustainable and balanced growth, there are some limits and difficulties to its full deployment that need to be addressed. First of all, more often than not, the decision to start a business is not one based on choice, but on constraints: even if some migrant communities look more ready to start businesses, in general what happens is that the rate of unemployment among New Europeans is so high that they are forced to start their own business. The second problem lies in the kind of business New Europeans normally gravitate towards, which are relatively low-value sectors: they might be easy to get into, thus providing a good way to earn a living, but they are very competitive, thus the prospect of growth is small. As a rule, New European-owned enterprises are smaller than native-owned ones. A third big challenge New European entrepreneurs face is access to finance: since they lack relationships with banks or alternative finance providers, they tend to rely on informal, community-based resources. Which again means having enough funds to start a business, but not enough to grow it.
The points outlined above all together point to a situation in which New European entrepreneurs are still left behind. This has to be addressed at all levels: even if their role has been correctly acknowledged, the EU cannot afford not to fully grasp the growth, innovation and integration potential of New Europeans. On this point, at the local level there have already been some particularly successful experiences of migrant entrepreneurship training and financing that deserve mentioning such as the ELIE project, established by a group of European Universities, and the DELI network of cities.
But I am more than pleased to see that things are slowly moving even at the highest level: the European Commission has addressed for the first time the issue in its 2020 Entrepreneurship Action Plan, urging Member States to remove legal obstacles hampering the start of business of citizens from third countries and to propose policy initiatives to facilitate entrepreneurship among migrants.
Such policies are a good starting point for eliminating the barriers to business and creating the growth and innovation the EU needs so much. But they will only be a mere façade if they will not go together with a change in the broader perspective towards New Europeans, away from seeing them as threats and towards seeing them as contributors to our shared prosperity.