In the US, people strongly believe in free markets. The government intervenes as little as possible, assuming that companies regulate themselves. This gives them the space to grow and scale up quickly. In the EU, the emphasis is on monitoring the balance between the interests of technology providers and users. That is why rules have been introduced that protect personal data, promote fair competition and combat harmful content online. These regulations reflect European values such as justice, democracy and human rights. Consider, for example, the ban on manipulative AI systems and the transparency obligations under the AI Act.
But regulation is not the only reason why Europe lags behind the US when it comes to technological innovation. The EU is made up of many countries with different legal systems, languages and cultures. That makes it harder for companies to scale up quickly, unlike the more unified US market.
An important cultural difference is in the willingness to invest. In the US, there is a lot of venture capital available for new ideas, while European investors are generally more cautious. Also, failing as an entrepreneur is more often seen as something negative in Europe, while in the US it is viewed differently. Bankruptcy laws are more lenient there, which encourages risk-taking. Finally, top American universities attract a lot of technical talent. Europe is struggling with this, which limits the growth of the tech sector. These factors are at least as decisive – if not more decisive – for the success of the tech sector than differences in regulations.
Moreover, legislation can actually stimulate innovation, especially if the rules are clear. For example, competition rules create room for new players. And clear frameworks provide legal certainty, which actually strengthens the investment climate.
