欧洲的创新问题是一个竞争问题

June 2026 Europe’s Innovation Problem Tommaso Valletti Imperial College, London, and CEPR To ensure timely dissemination, the “Europe 2050” papers are publishedwithout editing or typesetting. These contributions will subsequently formthe basis of CEPR Paris Report 5, to be published at a later stage and Europe’s Innovation Problem Is aCompetition Problem Tommaso Valletti (Imperial) 1. Europe’s technological challenge is not only about scale Europe is once again discussing industrial policy. The Draghi and Letta reports have reinforceda growing consensus that Europe risks falling behind in productivity growth, innovation, andtechnological autonomy. The concern is understandable. Europe has excellent universities,strong scientific traditions, world-class engineering capabilities, and considerable wealth, yet The standard diagnosis focuses on familiar problems: fragmented capital markets, insufficientscale, underinvestment, excessive regulation, and the incompleteness of the single market. Europe’s innovation problem is also a competition problem. This may sound paradoxical. Competition policy is often presented as a constraint on industrialambition. If Europe wants “European champions”, the argument goes, it should tolerate larger Economics gives a more nuanced answer. Some scale is undoubtedly useful. But beyond acertainpoint,market power weakens the incentives that drive experimentation andtechnological progress. The problem is not size alone. The problem is what happens to thefirms that never get to grow: the startups that are acquired before they can scale, the ventures Rising concentration across European industries has been documented in recent empirical work(Koltay et al., 2022). Europe produces roughly half as many high-growth “unicorn” startupsper capita as the United States. Research by Akcigit and Goldschlag (forthcoming) shows that There is also a prior conceptual problem worth naming. Talking about the “competitiveness ofthe European economy” as if it were a single actor competing against the United States orChina is misleading. It is firms and workers that compete and coexist in industrial districts andecosystems, not economies as such. The success of one sector in attracting resources, talent, 2. Why do small firms not scale up? The conventional European debate asks how to make large firms stronger. In my opinion thisis the wrong question. One should instead ask: why do small, innovative firms so rarely grow The answer is not only about financing, though that matters. It is about the competitiveenvironment into which new firms are born. Arrow famously argued that monopolists haveweaker incentives to innovate because they already earn rents from existing technologies. Laterwork by Gilbert and Newbery showed that incumbents often innovate defensively, not to Post-merger evidence is telling. Acquiring firms tend to reduce their own R&D effort after adeal. Rivals may partially compensate, but net innovation typically falls (Valletti, 2025). Onesymptom is particularly telling: the emergence of “kill zones” around dominant platforms andincumbents. Venture capitalists in Europe increasingly avoid funding startups that might The result is an economy with less entry, fewer experiments, and weaker creative destruction.Frontier innovation is highly uncertain: most startups fail. But productivity growth comes from Competition for talent illustrates this vividly. When dominant financial or platform firms attractphysicists, mathematicians, and engineers to work on algorithmic trading or ad optimisation,those same people are not working on battery technology, energy systems, or biomedicalinnovation. The “competitiveness” of incumbent firms in their own input markets can actively The legal and tax infrastructure also matters, and Europe’s has historically been unfriendly tonew entrants. Weak shareholder protection reduces the attractiveness of equity finance andlimits the development of stock markets as a channel for scaling new firms. Capital gainstaxation that effectively double-taxes the returns to venture investment reduces the incentive 3. When a European startup is acquired by a US tech giant, whatstays in Europe? Merger policy matters for another reason that the standard framework often ignores: the Europe’s competition framework evaluates mergers primarily on the basis of consumerwelfare, typically proxied by prices and product variety. This framework was designed for a When a European startup is acquired by a US technology giant, what actually stays in Europe?The founding team typically relocates or disperses. The intellectual property is consolidated Europe are miniscule. Future R&D is directed by the acquirer’s priorities, not European ones.The “efficiency gains” that regulators approve may be entirely real, and entirely captured This is not merely a distributional concern. It is a sovereignty concern. A Europe that producestalented researchers and innovative startups, onl