EU Science Hub

Nordic EU members and Luxembourg offer best conditions for digital startups, new index shows

Mar 20 2019

The JRC  recently launched the European Index of Digital Entrepreneurship Systems. This tool compares the digital entrepreneurial ecosystems in the 28 EU countries, by looking at the conditions important for digital enterprises.

The digital transformation has radically changed entrepreneurial opportunities and the way companies pursue them. In order to facilitate their growth, entrepreneurship ecosystems, in other words the social and economic environment affecting entrepreneurs, must also evolve. Therefore, both policy makers and aspiring entrepreneurs have to understand how the quality of legislation, taxation or physical infrastructure affects business success or failure.

The European Index of Digital Entrepreneurship Systems (EIDES) sheds light on digital entrepreneurial ecosystems. It measures both physical and digital conditions for early stage and mature enterprises across the 28 EU Member States.

Map of Europe for digital entrepreneurs

According to the EIDES ranking for 2018 Denmark, Sweden, Luxembourg, and Finland offer the best conditions for digital entrepreneurship. In particular, Denmark is first in all aspects of digital entrepreneurship.

The next group of countries, the "followers", includes Germany, United Kingdom, Netherlands, Ireland, Belgium, Austria, Malta, Estonia and France. Germany and the United Kingdom lead the group with very similar performances.

A third cluster is made of "catchers-up": Spain, Czech Republic, Lithuania, Slovenia, Portugal and Cyprus, with the rest of the EU member states in the fourth group.

The EIDES report contains individual factsheets for each EU Member State.

What builds the entrepreneurial ecosystem? General and systemic framework conditions

EIDES looks at the general framework conditions for setting up and running an enterprise: culture and informal institutions; formal institutions; regulation and taxation; market conditions and physical infrastructure. EIDES evaluates both the digital and non-digital aspects of these conditions to complete the picture.

EIDES also looks at the systemic framework conditions, or resource-related conditions, which may determine success in a given country. In practical terms, businesses require a range of different resources, such as human capital, knowledge creation and dissemination, finance, networking and support in order to grow. EIDES evaluates the digital and non-digital aspects of these systemic framework conditions for three stages of entrepreneurial development: stand-up, start-up, and scale-up phase. In other words, from the decision of the individual to become an entrepreneur, the creation of his business, to the scaling up of the start-up that has discovered a business model with high-growth potential.

European Index of Digital Entrepreneurship Systems

EIDES ranks the 28 Member States according to the level of their digital and non-digital entrepreneurial conditions. It presents country-scores for the entrepreneurial conditions necessary for stand-up, start-up, and scale-up ventures

It also provides policy scenarios to optimise the EIDES score at country-level. For example, for Romania –from the group of catchers-up– the bottleneck (i.e. the EIDES pillar with the lowest pillar score) which holds back the whole national entrepreneurial system is the "Market conditions". In the EIDES ‘optimal’ allocation of resources the policymaker should first target the weakest pillar. Therefore, Romania would improve its EIDES score by 10% by putting 75% more resources in the "Market conditions".

For Portugal –from the group of followers– the bottleneck to entrepreneurship is "Culture and Informal Institutions" and this country should devote 24% more resources to "Culture and Informal Institutions" to have a 10% improvement of the whole entrepreneurial system.

Background

The European Index of Digital Entrepreneurship Systems was launched during the workshop "Assessing the European framework conditions for digital start-ups and scale-ups: The European Index of Digital Entrepreneurship Systems" taking place in Brussels on 19 September 2018.

The EIDES was prepared within the project on Research on Innovation, Start-up Europe and Standardisation in collaboration with Imperial College London Business School and University of Pécs.