Investigating the Lack of Prominent Big Tech Companies in Europe
Nokia, a Finnish telecommunication company, has been the world’s most prominent tech company since 1992. Peaking its popularity with the release of the Nokia 3000 in 2000, Nokia dominated the mobile phone market, accounting for approximately 40% of the total market share at its peak (Doz, 2017). Nokia, as well as other European Big Tech companies, exemplified their leadership in technological industries. However, after the release of the iPhone in 2007, Nokia started to lose its fame. Nokia was surpassed by Apple in market share by 2011 and soon fell behind Samsung, Huawei, Xiaomi, and other big tech companies (Statista, 2024). The downfall of Nokia not only hallmarked the company's decline but also signaled a broader decline in Europe’s leadership in global technology. Big Tech in Europe has yet to fully recover. The images below illustrate the market capitalization of tech companies as of October 21, 2024.
As of Oct. 21, 2024, the market capitalization rankings of Big Tech companies were dominated by American and Asian companies. The companies with a total market capitalization of over 1 trillion dollars are as follows: Apple, NVIDIA, Microsoft, Alphabet (Google), Amazon, Meta, and TSMC. Six out of seven of them are American companies. As the image above shows, most Big Tech companies are located in the United States or Asia, as only two European companies, ASML and SAP, are ranked in the top 25. These European companies have market capitalizations of 280.78 and 267.68 billion dollars, respectively, which does not come close to the market capitalization of any of the United States’ "Magnificent 7": Apple, Microsoft, NVIDIA, Tesla, Alphabet, Meta, and Amazon. Due to the dominance of American tech companies, the primary producers of tech products in Europe are almost entirely American (Upton-Clark, 2023). When Europeans consume American products instead of their own, they intensify the power gap between American and European companies.
The mass consumption of American tech products across Europe resulted in a significant disparity in Gross Domestic Product (GDP) per capita between the United States and the European Union. Though the European Union has always had a smaller GDP per capita compared to the United States, the difference has grown since 2010 (WorldBank, 2024).
Why is there no Big Tech in Europe?
Mario Draghi, the former prime minister of Italy and former president of the European Central Bank, recently presented a report titled “The Future of European Competitiveness,” analyzing the problem of a lagging European tech sector and ways to overcome it. According to Draghi, the fundamental problem that hinders the overall economic development across the European Union is fragmentation among the Union itself. The fragmentation of the European Union can be split into three considerations: lack of funding for start-up companies, an overload of regulations, and fragmentation of the single market.
It is natural to assume that the decline of the tech industry in Europe is the fault of European entrepreneurs. However, the entrepreneurs themselves are innovative enough, as “Europe has a strong position in fundamental research and patenting: in 2021, it accounted for 17% of global patent applications versus 21% for the US and 25% for China” (Draghi, 2024, p. 24). Although Europe holds a smaller portion of global patent applications compared to the United States and China, the difference is rather marginal. The factor that drives this disparity between American and European entrepreneurship is that “only about one-third of the patented inventions registered by European universities or research institutions are commercially exploited” (Draghi, 2024). Draghi’s report also suggested that researchers in Europe are more separated from innovation clusters — networks of universities, start-ups, large companies, and venture capitalists — than their American counterparts (Draghi, 2024). Unlike the United States, whose investors from various states invest significantly in start-up companies, the European Union’s network is very sparse, forming an environment that could deter potential investors. Furthermore, each European country has its own distinct regulations, which can also significantly interfere with the rapid expansion of European companies. Unlike the unified market in the United States, regulatory differences across Europe have resulted in the fragmentation of the market, highlighting the futility of scaling European companies to a global level within the current framework.
The solution for Europe is relatively simple: create a start-up ecosystem like that of the United States through financial unification between European countries. Draghi also asserted that “to meet the objectives laid out in this report, a minimum annual additional investment of EUR 750 to 800 billion is needed, based on the latest Commission estimates, corresponding to 4.4-4.7% of E.U. GDP in 2023”. If European countries were to work together to reduce regulations and make business easier for start-ups, far more investment would flow into Europe and could help restore the once-great European tech industry.
Edited by Nicolas Nemati
References
Draghi, M. (2024). The future of European competitiveness. https://commission.europa.eu/document/download/97e481fd-2dc3-412d-be4c-f152a8232961_en
Hagedoorn, P. (2023). Without big tech, Europe Falls behind. The Fluid Society. https://thefluidsociety.com/without-big-tech-europe-falls-behind/
GDP per capita (current US$) - european union, United States. World Bank Open Data. (n.d.). https://data.worldbank.org/indicator/NY.GDP.PCAP.CD?locations=EU-US&most_recent_value_desc=true
Global smartphone market share by vendor 2015-2024 | statista. (2024). https://www.statista.com/statistics/632249/global-smartphone-market-share-by-vendor/
Largest tech companies by market cap. CompaniesMarketCap.com - companies ranked by market capitalization. (2024). https://companiesmarketcap.com/tech/largest-tech-companies-by-market-cap/
Upton-Clark, E. (2024). Why is Europe’s tech industry lagging behind the US? Home.
https://eqtgroup.com/thinq/tech/why-is-europes-tech-industry-lagging-behind-the-us
Corporate Europe Observatory. (2024). Uncovering Big Tech's hidden network [Illustration]. Corporate Europe Observatory. http://corporateeurope.org/en/2024/10/uncovering-big-techs-hidden-network
