EU is facing a ‘scaling gap’ ─ EESC debate calls for reform in innovation-to-market pipeline

This article is brought to you in association with the European Economic and Social Committee.

EU policymakers, industry leaders and innovation experts are calling for sweeping reforms to help European startups scale and compete globally, warning that persistent barriers such as fragmented regulations, limited market access and risk-averse culture are stifling Europe’s innovation potential.

At its April plenary session, the European Economic and Social Committee (EESC) held a debate on improving the ‘innovation to market’ journey and on addressing barriers for start-ups in the European Union, highlighting a paradox: while Europe produces strong research and a growing number of start-ups, too few companies successfully scale into global players.

In its opinion on the EU Startups and Scale up Strategy – with a Focus on European Innovation Act, adopted at the plenary, the EESC called for decisive action to strengthen Europe’s innovation field, where fragmented rules, slow administration and regulatory complexity are holding back start-ups and scale-ups across the EU.

‘In strategically relevant industries, there is growing concern that the environment in Europe has become too fragmented, too dense and too slow to keep pace with rapid technological developments globally,’ EESC president Seamus Boland said opening the debate. ‘Europe needs to reinforce innovation and research and catch up with commercialising the products of these efforts through spin-offs, start-ups and scale-ups. We must also retain talent in Europe and free start-ups from the need to search for financing outside the EU to address the traditional risk-averse culture and to celebrate entrepreneurship in all its forms.’

Strong foundations, persistent barriers

Andrea Ticheru, Taskforce on Startups and Scaleups and lead for the European Innovation Act at the European Commission, said the EU has significant strengths, including record levels of company creation in 2025 and a solid research base. However, barriers in commercialisation, in access to finance, market access, talent infrastructure, and also coordination between Member States, are slowing down the transition to the market stage. Also, funding is often concentrated at the research stage, leaving a critical gap later in the development process.

Public procurement remains an underutilised tool. ‘Basically, we are investing five times less than the US and South Korea in public procurement of research and development,’ she said. At the same time, only one-third of university patent applications are successfully commercialised.

To address these gaps, the European Commission is advancing a Startup and Scaleup Strategy alongside a forthcoming European Innovation Act, aimed at accelerating commercialisation and simplifying access to markets across sectors.

A ‘scaling problem,’ not an innovation problem

Several speakers agreed that Europe’s main issue is not generating ideas, but scaling them.

Mohammad Iranmanesh, Managing Director of constellr, Belgium, illustrated the complexity faced by start-ups operating across borders. Expanding into multiple EU countries often requires navigating entirely different legal and administrative systems.

‘We feel that we have to rebuild the company from scratch with new legal structures, new administrative systems,’ he said, adding that such complexity can cost start-ups hundreds of thousands of euros and deter investors seeking simplicity and predictability.

He argued that ‘in Europe we don’t really have this innovation problem… what we have is a scaling problem,’ emphasising that speed and simplification should be central policy goals.

Fragmentation and culture at the core

Stefan Dobrev, European Institute of Innovation and Technology (EIT), stressed that fragmentation across markets and regulations continues to hinder innovation, making it difficult for start-ups to operate seamlessly across borders. He also highlighted the importance of culture, questioning why European companies invest less in innovation than global competitors despite strong public funding.

‘We do not have the communities that allow a young researcher from Spain to launch a company in Cyprus… and sell to a customer in France,’ he said.

Structural reform and “Regime Zero”

Calls for systemic reform were echoed by Reinhilde Veugelers, senior fellow at Bruegel, who emphasised the need to design frameworks specifically for high-growth startups.

She warned of a ‘long-standing innovation gap on private spending’ and argued that Europe lacks fast-scaling companies capable of challenging global competitors. Her proposed ‘Regime Zero’ framework would include fully digital company incorporation, simplified bankruptcy rules, and improved equity compensation systems to attract talent.

‘What we are really missing is these new innovative companies that are able to scale very fast,’ she said, stressing that regulatory clarity and transparency are essential to unlock investment.

Agnès Mathis, Director of Cooperatives Europe, called for stronger investment in education and cross-disciplinary skills, alongside greater recognition of diverse business models, including cooperatives. She noted that cooperative start-ups can have higher survival rates but often struggle to access funding due to limited understanding among investors.

Other contributors emphasised the need to include women and underrepresented groups in innovation policy, warning that competitiveness depends on inclusivity.

EESC welcomes the European Innovation Act

Rapporteur of the EESC opinion Paul Rübig stressed the importance of reducing administrative burdens and creating incentives for entrepreneurs, arguing that start-ups and spin-offs generate jobs and tax revenue, delivering long-term returns on investment.

He also pointed to overly complex financial regulations as a barrier and proposed initiatives such as regulatory sandboxes and improved university incentives for spin-offs.

In the opinion, the EESC welcomed the upcoming European Innovation Act (EIA) as an important step in supporting start-ups, scale-ups and spin-offs. 

However, it emphasised that the Act should support a fair transition, making sure innovation helps the economy grow and creates jobs, while also supporting workers and regions affected by technological and industrial changes.