The key to driving sustainable economic growth

I’ve seen the pursuit of innovative ideas and the willingness to take calculated risks time and again prove to be a powerful force for driving economic growth. By creating new businesses, entrepreneurs generate employment opportunities, foster innovation, and contribute to productivity gains. Entrepreneurial ventures today are a real source of job creation. Startups and small and medium-sized enterprises (SMEs) often employ a significant portion of the workforce. In fact, SMEs accounted for 99.8 percent of all enterprises in the EU in 2020, employing approximately 67 percent of the total workforce.

Entrepreneurial endeavors are also instrumental in disrupting existing industries and introducing new solutions. Startups and entrepreneurs often possess the flexibility and agility to challenge traditional business models and embrace emerging technologies. Nobel Laureate and economist Sir Christopher Pissarides, who I was honored to host onstage at Nobel Perspectives Live! Frankfurt, is an expert in labor market dynamics and economic growth. He understands the worry some people have about new technologies destroying jobs, but he prefers a different, more optimistic view, one that emphasizes the importance of entrepreneurship in driving productivity gains through technological advancements. By integrating innovation and technology, entrepreneurs pave the way for long-term economic growth, as witnessed in Europe's thriving tech hubs like London, Berlin, and Stockholm.

“New technologies always destroy some jobs but then they give you the potential to create other types of jobs,” says Pissarides. “I would venture to say that the jobs that are being created are better than the ones we left behind, in a general sense. The challenge for governments and individuals themselves is to realize where the economy’s going and take advantage of it rather than sit back and worry.”

Entrepreneurship also serves as a pathway to wealth creation, benefiting both individuals and society as a whole. Through successful ventures, entrepreneurs play a vital role in accumulating capital and attracting investment. These investments, including raising venture capital or via angel investors, not only enable the expansion of their businesses but can also add to wealth within their communities and the economy by stimulating economic activity.

Another important benefit of entrepreneurship not to be underestimated is its ability to empower people from more diverse or marginalized backgrounds to achieve economic success. Predefined career paths can be challenged, allowing individuals to create their own opportunities. Because of this, entrepreneurship can contribute to more inclusive growth by increasing diversity, bridging societal gaps, and reducing income inequality.

As Pissarides puts it, “Most of the new developments and ideas come from startups, from young people fresh out of university and technically very skilled. But we need economic integration.”

He also stresses the importance of the fact that jobs must be good jobs, not just jobs for the sake of jobs. “A good job is one where there is a feeling of security in your employment. That your job is good enough to give you a good standard of living, both in normal and in abnormal times.”

Europe boasts a rich entrepreneurial heritage but further efforts are needed to create an ecosystem conducive to entrepreneurial success today. Policymakers, financial institutions, and higher education all play a critical role in supporting and developing those ecosystems. By cultivating strong entrepreneurship networks, Europe can unlock its immense potential for innovation, job creation, and social mobility. I encourage anyone considering an innovative idea to embrace entrepreneurship's transformative power, to become a part of paving the way for a prosperous and resilient future in Europe.