European Tech Ecosystem: A Growing Power on Silicon Valley’s Radar

When most of the world thinks about the heart of the technology industry, they think of Silicon Valley. That appears to be changing as the future of the tech ecosystem moves to Europe.

Old World Made New?

The United States is known for being the place where new things happen.  Europe as a whole is viewed with an air of tradition.  That said, this doesn’t mean that it has been left in the past.  The U.S. may have 15 of the leading 20 tech firms (in terms of value), while Europe has only one, but the winds are starting to change. The tremendously powerful tech industry is placing its focus on Brussels and Berlin to a growing extent, as opposed to more traditional technology locations such as California or Washington.  The European Union has spotted an opportunity as certain players in the United States face challenges.  Moreover, the E.U. is both solidifying and enforcing its regulations.

Changing Regulations

The outcome has been that U.S. tech giants have faced penalties and considerable fines from E.U. regulators.  For instance, earlier this year, Google faced a $1.7 billion fine for violating competition regulations in the European advertising market. Moreover, new digital copyright laws are on their way. Furthermore, Spotify has accused Apple of antitrust abuses in the E.U. Beyond that, the E.U. is drafting a unique tech regulation for the purpose of handing individuals control over their own information.  This would include control over any profits generated from their information. The regulation would also force open tech firms to compete. Millions of users stand to benefit from these new regulations. It also has the potential to boost the economy while keeping tech giants reined in after they have accumulated substantial power without being required to be responsible with that power.

New World’s Struggles

At the same time, well established tech giants in the United States are facing considerable challenges at home as well. Billionaire tech tycoons have found themselves facing Congress following privacy violation accusations.  The U.S. as a whole is facing massive debates over whether its tech giants have become too large and powerful.  For instance, Senator Elizabeth Warren, who is running for president in 2020, feels that Facebook should be broken into smaller companies. Regulators in the U.S. have placed many tech firms in the hot seat.  That said, this is nothing new.  In the 1960s, IBM faced antitrust challenges.  Microsoft went through the same thing thirty years later. Modern accusations go beyond the issues of the past.  It’s not just a matter of strangling competition and grabbing hold of massive rents. Instead, it also includes more far-reaching allegations, such as permitting misinformation to destabilize democracy as well as the abuse of individual rights through privacy violations.

The Future Points to Europe

While the E.U. gets its approach in place several steps ahead of the United States, it is setting up to become a force to be reckoned with in the tech industry.  Just as the U.S. tech giants face possible break-ups, companies in the E.U. could be bolstered by the competition regulations. Indeed, one or several of the chopped-down companies resulting from Facebook or Google’s break-up could become dominant again, but they would need to do so as rivals grow within the new E.U. ecosystem. There, tech firms will have grown from start-ups into larger powers within the E.U. restrictions.  The E.U. has become a world leader in tech industry legalities.  The General Data Protection Regulation (GDPR) has, for example, become a template for similar laws in countries around the world.  There is no reason to believe that things would occur differently with other developing regulations, such as those regarding individual sovereignty over their own information and those stopping firms from locking out competition.

Risks and Rewards

Certainly, there are risks involved in the European approach. Just as the GDPR has proved to be quite clunky, despite its being among the best versions of this type of regulation currently in place, it remains a leader.  Equally, E.U. bureaucrats will depend on entrepreneurs to develop many of the finer details of the regulations. Many of those entrepreneurs will be from the U.S. Finally, among the largest of the risks will be that after all is said and done, the European approach will not be adopted by other major players around the world. This would place the E.U. at risk of isolating itself from the mainstream. Still, the largest firms will not want to divide themselves between two continents and there are indeed indications that even the U.S. is turning to Europe on tech to an increasing degree.  For instance, California – home of Silicon Valley – has implemented its own law not unlike GDPR.  Once the E.U. institutes its own new regulations, the U.S. may not hesitate to replicate those as well, thereby cutting down that risk altogether.