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Cost of Failure: A First Order Issue in Europe
Heading US investors tend to be more cautious about investing in Europe due, in large part, to the significantly higher restructuring costs here compared to those in the US and other regions. Investors are more reluctant to take risks here, even at equal levels of innovation attractiveness. This was the key insight from a study titled ‘The Costs of Restructuring and Competitiveness in Disruptive Innovation’ by O. Coste and Y. Coatanlem, which was discussed at the October session of a working group.​
• Cost of Failure is recognized as a Key Factor in the “closing the innovation gap” Pilar
• “Lower growth prospects for EU start-ups and higher costs of failure weaken their attractiveness in the eyes of investors. As a result, many seek funding in the US and relocate there to benefit from a larger market and customer base.”
• “The Commission will thus propose a 28th legal regime, which will simplify applicable rules and reduce the cost of failure, including any relevant aspects of corporate law, insolvency, labour and tax law.”
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