Success Factors of Startups in the EU—A Comparative Study

Abstract

The paper focuses on key success factors of startups in the European Union. Startup companies have a massive potential to boost the level of innovation and competitiveness of national economies. They are also uniquely equipped to provide extremely effective and flexible ways of meeting both existing and emerging market needs. However, the development of these microventures differs from country to country. Hence, we put forth a hypothesis that strategic success factors in the development of startups vary in highly developed and catching-up countries. Our main goal was to determine the key success factors of startups in the EU, and to classify the gap between developed and lagging Member States. For this purpose, we applied the method of component analysis on startup data available for selected the EU states. We managed to isolate 5 components explaining 72% of data variability, all of which can be linked to human capital as well as to formal and informal economic institutions. The results confirmed the validity of our hypothesis. We established that more developed countries offer an institutional competitive advantage to startups, while the gap in success factors between highly developed and catching-up countries can be attributed to human capital and to institutions. Based on our findings, we offer suggestions how to reduce this gap by improving formal and informal institutions via innovative public policy and by supporting education.