the PowerPoint for one of my college presentations on the comparative political economy of European startup ecosystems, under the "Varieties of Capitalism" framework.

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Varieties of Capitalism, CME Innovation,
and Tech Startups in Europe
Eric Peckham
10 December 2012

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Varieties of Capitalism
“[Firms] are the key agents of adjustment in the
face of technological change or international
competition whose activities aggregate into
overall levels of economic performance.”
-Peter Hall & David Soskice

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Varieties of Capitalism
 Liberal Market Economies (LMEs)
 United Kingdom, Ireland, United States
 good at services and creative destruction
 Coordinated Market Economies (CMEs)
 Germany, Sweden, Switzerland
 good at skilled production of capital-intensive products

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CMEs appear just as innovative
…or even more so.
 UN’s Global Innovation Index
 Switzerland (1), Sweden (2), UK (5), Ireland (9), US (10), Germany (15)
 Economist Intelligence Unit, overall & patents per million
 Switzerland (2), US (4), Sweden (5), Germany (6), UK (18), Ireland (19)
 Graduates in science and engineering
 1 in 4 Germans and Swedes
 1 in 5 Brits, Irish, and Swiss
 Investment in R&D, education, and infrastructure
 New business density
 University/Industry research collaboration

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Then why are US, UK, and Ireland
hubs for tech startups?
CMEs have problems transferring expertise into radical
innovation and face barriers to creating new businesses:
 Risk-Adverse Business Culture
 Burdensome Policies for Young Companies
 Lack of Risk Capital

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CMEs: Business Culture
 Focus on big companies
 High salary, high benefits, high social status
 Educational focus on technical process and next steps
 incremental innovation
 Failure is tough
 a failed business venture is seen as an embarrassment
 big corporations will see you as disloyal for leaving your
original company
Although attitudes are changing…

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CMEs: Policy Environment
 More bureaucracy to launch a new company
 Employment benefits make life difficult for founders
 High wages
 Firing is tough and expensive
 Long vacations and leave
 1/3 of raised capital can go towards social benefit payments
 Taxes
 options for employees
 capital gains

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CMEs: Risk Capital Financing
 Banks dominate, but don’t do much risk capital
 require founder’s personal guarantee
 don’t have management advice or connections
 want fixed business plan with low-term growth to big business
 Venture capital
 more risk-adverse institutional investors
 taxation of limited partners and general partners
 often government-driven
 smaller, less tech-savvy stock markets
 Lack of angel investors

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LMEs: US, UK, & Ireland
 Rankings
 Top “Ease of Starting a Business”
 Low “Cost of Redundancy Dismissal”
 High “Venture Capital Deals per GDP”
 High “YouTube Uploads per capita”
 Fluid talent pool
 Many investors
 Anglophone; Influence from US
 Hence, London as Europe’s largest tech hub

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Berlin: London’s CME Rival
 Safety net and infrastructural investment of CME
 still challenges with regulations
 Berlin can compete with London because
 counter-culture scene, away from traditional business
 cheap cost-of-living and many educated young people
 international: drawing foreign investors and programmers

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European CMEs & Tech Startups
 Positive Steps
 Challenges Remain
 with eased startup and risk capital regulations, CMEs
could see a bigger tech boom (with Berlin and Stockholm
as leaders)