Institutional Reform for Innovation and Entrepreneurship

The European Union suffers from an innovation deficit, which must be remedied if the EU is to improve the quality of life of its citizens and remain competitive in the global marketplace. In order to do so, more productive entrepreneurship is required. We analyze how Europe’s institutional framework conditions could become more supportive of entrepreneurship and innovation, and outline a reform strategy to achieve this objective. To be viable, the strategy emphasizes the large cross-country differences across the union. Each EU member state has evolved its particular bundle of institutions, many of which are complementary to one another. If these complexities are not acknowledged, well-intended reforms may become unpredictable or even detrimental to entrepreneurship and economic development.