Mobility drives growth
International expansion is a necessity today for all companies. As clients themselves become increasingly globalised, companies must follow suit and pursue the opportunities that this presents, as possibilities for growth. Physical presence is a definite benefit for a company, whether it is a start-up, an SMB, or a large group. It legitimises companies, allowing them to grow their networks and improve their knowledge of the local market, its stakes, and its actors.
However, only 1.5% of companies today are exporting to new markets. While exporting to European neighbors might at first seem to be a good first step, a test and learn that is easy to put in place for later international expansion, in reality the same amount of effort and investment would be required to go to the United States or China as in Europe. Add this to the fact that Europe is a more complex market because it is heterogeneous, and that one can expect a much lesser impact on growth. Given the opportunity/risk ratio, the decision is, unfortunately, an easy one to make, and expansion is either focused outside of Europe, or abandoned completely.
It is therefore vital to make access to European markets more fluid, to release the potential of entrepreneurs. Solutions already exist to bring down barriers to entrepreneurship. G20 countries should consider entrepreneur visas, similar to the start-up visas that Barack Obama wanted to create, as a first step. This visa could be available to any key player in a company’s development abroad for two to five years. As simple as a working holiday visa, this would boost growth and job creation considerably.
Let us not forget that an entrepreneur in a new market generally lacks time, resources, and knowledge of the local market. Beyond giving the entrepreneur such a visa, the administrative and fiscal processes should also be simplified to allow for a watching and learning period, vital to getting off on the right foot.
Entrepreneurs could save a considerable amount of time if they did not have to register their company in the new country and could pay taxes in their home country for the length of the visa. This time saved could be used to support longtime clients, grow their network, and re-calibrate their product for the new market, all while following the regulations of the new host country.
The case for European “simplificationism”
This desired simplification of mobility for entrepreneurs cannot occur without a shared desire to harmonise legislative frameworks. It is, of course, a far-off dream to imagine harmonisation at the G20 level, but it is realistic on the European scale. Today, differences across European Union (EU) countries pose a threat to the development of young French start-ups as well as hindering the movement internationally of young French start-ups and France’s most promising SMBs.
While American unicorns are developing and moving abroad at an impressive speed, why not support Europe by putting in place some sort of “simplificationism” across all European countries? Deployment across borders in Europe would be facilitated, and this solution would be far more efficient and acceptable to the world than promoting the protection of European borders.
The current European legislative framework suffers from several problems, including bureaucracy, composite taxes, legal vacuums, which discourage entrepreneurs from making moves. However, many solutions exist for most of these problems. Creating a model European work contract, based on what already exists for companies operating under European law through the EU, would make things much clearer and provide more accurate information about the job market and recruitment.
Today, the French labor code is over 3,000 pages long, while Germany does not have one. It would also be relevant to imagine a beneficial common tax system for new companies during their first few years of expansion, with, for example, a reduced tax rate for the first two years of operation. This would encourage and support new companies to develop across borders.
The majority of global economies are experiencing slowed growth and increasing unemployment rates. In many countries, SMBs are responsible for over 50% of the GDP and 75% of employment (source: IMF). SMBs also employ more than 2/3 of the private sector workforce. However, these economic actors are still struggling to receive the help that they need from their respective governments.
This subject is absent from today’s political discussions. However, given their contribution to the GDP, job creation, and innovation, governments (and government hopefuls) should support the entrepreneurial spirit and make the development of start-ups and SMBs a priority by working for growth by unity in our number one market: Europe.
This column was originally published on November 25th 2016 on Le Cercle des Echos, and translated from the original French by Niamh Cloughley.