November 17, 2008
In preparation of a talk I am going to give at ERRIN’s forthcoming marketplace on entrepreneurship on Tuesday, I have done a little Internet research on the financial crisis, entrepreneurship and innovation. Here are some thoughts and links:
New data from the US suggests that tech companies now get the full blow of the financial and economic crisis. The question that many ask now is “what will happen to innovation now that the world economy is in a tailspin”. Will businesses, governments and academia curtail their investments in innovation and scale back on risk-taking?
An article posted today by the Wharton school of Business suggests that the crisis could be the right time for innovation: “Loss of revenue and profit will at first instill a cost-cutting mentality, which is not good for innovation. But if the patient is bleeding, you need to stop that first. Then, however, a phase starts where leaders ask which parts of their business model are weak [and perhaps unsustainable] and that, in turn, can lead to restructuring and reinvention.”
Some people (see this blog entry) argue that crisis breeds innovation: “For entrepreneurs, financial uncertainty forces efforts to be streamlined. This is often when the best concepts arise as great innovators are excited by and step up to challenges much as great athletes reach deep within themselves to achieve peak performance.”
While proponents and opponents of more regulation of the world economy battle it out at the macro-economic level (the results of the recent G20 meeting seem to be still ambiguous, a probably more decisive follow-up meeting will take in April, after Obama will have taken office) Europe at the micro-economic level clearly needs to further upgrade its efforts in building a true culture of entrepreneurship in our regions, to address one of the underlying issues of Europe’s innovation gap.
On this I would like to quote Peter Jungen of the European Enterprise Institute, whom I had interviewed earlier this year: “The key for a higher innovation pace and more economic dynamics to increase growth and employment is a renaissance of the entrepreneurship culture in Europe. The poor pace of innovation results from a lack of new entrepreneurs. It is the birth of new firms that gives an economy its dynamics. This is the biggest deficit in Europe… “ (see the full article).