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European states and the global community are slowly returning to new post-covid realities while fiercely combating to reduce hardship to millions of families and negative effects to economy. In efforts to move forward on existing challenges, protect workers and consumers, increase energy security, etc. state and regional leaders have to accelerate, protect and modernise businesses, as well as facilitating national “spirit of entrepreneurship”.
There are already some lessons learned from the pandemic, as well as that of Russia-Ukraine military conflict, and other critical situations in energy and finances, political economy and business. They all have shown that both the national governance and the business community are being active in supporting the backbone of national growth, i.e. entrepreneurship; the former, including the EU institutions, acted swiftly to avoid long-term scarring to social-economic development, the latter moved towards limiting negative effects of job losses, but mostly through extensive use of generous states’ support and short-term working schemes.
With EU unemployment already back below its pre-pandemic level and company bankruptcies remaining around a third lower than long-term levels through the pandemic, it is clear that such bold political-economy measures have been quite fruitful in practical corporate/business activities and sustaining the entrepreneurship’s spirit.
The general opinion is that fundamental changes would also transform consequently the political and economic governance, while turning most existing national development models onto new perceptions, proceedings and perspectives. Some of the expected fundamental changes will be reviewed in the present article providing business entities and governing elites with an updated insight into “revised” national perspective growth patterns.
It is not only that the pandemic has temporary terminated socio-economic progress which occurred in Europe during the last decade: it will have long-lasting repercussions on the economy and society, thus challenging both the many people’s decent life and the ways corporate entities run their businesses. In this context, the global governance and that of the EU institutions have already stepped-up their efforts to contain the threats posed to businesses, workers and ordinary people by accelerating recovery and delivering on perspective political guidance. These efforts seem to be resolute and sufficient to provide for innovative actions to complement already existing corporate initiatives. One thing is evident enough: the current multiple crises should serves as a wake-up call for governing structures towards changes in contemporary social, political, economic and entrepreneurship systems.
The following main issues shall be taken into account in analyzing present business strategies:
1. Challenges (global and European) for existing policies and approaches to governance and business; among the most vital are: digitalisation and climate change measures, sustainability and circular economy, energy efficiency, clean transport and city planning, etc. with all their affects on business, entrepreneurship and corporate strategies.
Dynamic global changes in all walks of life, in particular during and after recent pandemic crisis, have dramatically “re-charged” traditional and emerging contemporary approaches to economics and entrepreneurship. In order to get in line with the new trends, not only existing companies have to be very sensitive to these changes; modern changes in business technology and management are also affecting all spheres of future work conditions, as well as governments’ perspectives on such issues as mitigating climate change, sustainable and circular economy, waste management and digital transformation, corporate social responsibility, etc. Therefore, corporate entities, the entrepreneurship in general and the governance elites, have to watch closely the main global and European trends and their consequences on perspective growth patterns and national survival.
Both governing elites and, in particular, corporate management are already being quite sensitive to these global challenges and trying to transpose them into effective and competitive national socio-economic priorities. For example, climate change challenge and post-Covid turbulence, have created a unique chance to steer the national economies away from carbon energy sources. The issues of increasing energy prices make it easier to introduce more subsidies and even a carbon tax: e.g. oil and gas companies as well as steel producers and carmakers are already taking dramatic steps through consequential transformations. Particularly, Russia’s war on Ukraine has forced the EU to act with a speed and unity rarely seen before: thus, a group of 11 countries (Denmark, Germany, Finland, the Netherlands, Ireland, Austria, Spain, Luxembourg, Latvia, Sweden and Slovenia) has warned that the EU-27 should use the “post-military conflict” as an occasion to speed up investment in renewables, the trend which is already turning modern business into a completely new direction.
Besides, the climate change is another challenge for entrepreneurship: some EU states (generally led by Denmark and other Nordic states), argue that the best way to become independent from Russian fossil fuels is “through accelerating the green transition towards climate neutrality in the EU by 2050 at the latest.” (1)
These challenges and the EU actions coincided with the calls from the UN climate experts that warned in mid-2022 that humanity has less than three years to reverse the trend of rising greenhouse gas emissions if it wants to maintain a livable world; and the best way is to move ahead with the “twin transition”, announced by the European Union, as any delays would only prolong the EU’s fossil fuel dependency.
However, getting national economies on sustainable paths requires climate-friendly investment that, thanks to low interest rates, will be more affordable. All states and corporate entities are supposed to “seize the momentum” mostly through restructuring governance models in the present political-economy’s structures followed by the “restructured” business model business. Some “global initiatives” could have a positive effect on European corporate interests and activity, e.g. additional attention is needed to look at the China’s Belt & Road Initiative for the EU member states, with recommendations to follow on how businesses may address the corresponding sub-regional challenges. For example, in global competition some countries have shown progressive “guidance” in reaching a sustainable growth. Thus, China has adopted in mid-2020 “six stability spheres” in national development: i.e. employment, financial sector, export, internal investment, foreign direct investment and internal consumption; it is high time to compare these stability sectors with the European political priorities and business activity.
2. Politico-economic balance in modern European development reflects national approaches to transformations in business; hence it is important to analyse both a new concept of a united theory of “twin governance”: e.g. with closer complementary ties between politics and economics in modern growth, and new ways for governance to “direct” changes in corporate strategies due to contemporary global and European challenges inspired by the Fourth Industrial Revolution.
Historic governance’s examples (e.g. in Germany and France) are showing evolution of the “united-twin governance” in searching for an optimal socio-economic development. Hence, presently, the planning aspects are already becoming a common place both in the states and European guidance.
The COVID-pandemic has accelerated some of the challenges’ effects on changing patterns in political-economy, including some new aspects in development such as sustainability, climate change, circular economy, digitalisation, “green agenda”, etc. As a rule, the entrepreneurship’s activity and competitiveness in a great extent depend on a country’s governance system and the elites’ approaches to the inherent connections between politics and economics, where the politics represent a scientific discipline defining national political priorities, while economics is a “sphere” of practical implementation of national socio-economic strategies. Even a short view on modern state-of-art in approaches to political economy at different times and in various countries could show the decision-makers the need to “impose” a modern-type national political economy structures in the EU and The Baltic States. (2)
Modern European political priorities for the period up to the end of 2027 are concentrated on completely different (from, e.g. those in China) although also six spheres: European “green deal”, socio-economic growth, digital agenda, promotion of European values, increased EU role in global affairs and strengthening democracy. (3)
3. Closer attention shall be devoted to revealing business perspectives within present EU “social market economy” approach to integration and national development. A modern state’s socio-economic development agenda can be perspective only through evolving into a new type of political economy, which represent a new stage in national growth strategy with a progressive “business climate”. For example, the Baltic States’ governance system went through numerous “ups and downs” in its evolution during last three decades; its new stage signifies a complex transformation in political and economic structures influenced by new global and European challenges, making the whole socio-economic system functioning in a different way. Some of the “new realities” include such necessary changes in the political and economic systems as e-governance, robotics, artificial intelligence, teleworking, online education and a lot of others. It is evident that these changes provide a “window of opportunities” and perfect background for sound entrepreneurship and a progressive business in the Baltic States.
Looking at the corporate perspectives, one has to remember that the general entrepreneurship’s definition has been stable for several decades if not centuries: as popular business dictionaries explains, it is “the capacity and willingness” to organise and manage a business venture in view of making profit; hence the term “business” is equivalent in British English to undertakings, i.e. any corporate activity which is undertaking risks in a pursuit for profit. The risks were numerous all the time, and recent pandemic only multiply them in quantity and “quality”.
Possibilities and options of being a successful entrepreneur have been evolving drastically through last decades: for example, previously, there have been quite a few “qualities” to make a successful business (except pure luck): i.e. innovative initiatives and ideas, basic skills and sufficient capital. Presently, the capital is readily available from both private and private sources, “basic skills” are taught in modern schools; the only valuable resource is innovative ideas (often within the national priorities) that modern entrepreneurship can provide.
As a result, business has been flourishing lately in Europe and the world: there are presently about 600 million entrepreneurs (out of over 7 billion population globally); correspondingly, over 23 million businesses in the EU with about 500 million. However, the “corporate dynamics” is rapid: about 22 per cent of all of SMEs fail within the first year and only one third of all companies manage to get through their 10th year, which can be considered quite a success; besides, the SME’s “aging” is increasing: about 60 per cent of startups are between the ages of 40 and 60. But still, all the mentioned modern challenges can alter that statistics to the positive if these challenges are taken seriously by the governing elites. For example, it appears that presently construction is the most popular profession for entrepreneurs, followed by retail, real estate and consulting with about 10 per cent each. However, the creative professions are in the seventh place and marketing is at the very bottom with less than 2 per cent.
The large majority of successful entrepreneurs are actually middle-aged persons who have been in the industry for quite some time; the most successful undertakings are in the US with about 600 (!) billionaires at present. (4)
Specifically, social economy and business interconnections are to be dealt with when looking to changing aspects in entrepreneurship.
4. Then, while analysing business in the new century, it is vital to see the role of science, technology and innovations in transforming entrepreneurship as the main driving forces towards “making business fit for the future”.
European “science policy’s framework” is divided between numerous EU institutions and the member states through the so-called “shared division of competence”: the EU provides guidance and funding, the states implement perspective science and research achievements. Quite notable, that traditional research and development (R&D) are transforming in the EU’s science policy into research and innovation (R&I), or even science, research and innovation (SRI), showing the trend towards innovative approach in socio-economic research.
Therefore, it is important that states’ R&I shall be closely intervened into the European-wide “scientific environment” based on common EU research efforts. As to the EU’s financial assistance, the next seven years’ budget for up to 2027 includes “maximizing the impact of EU research and innovation in the member states progressive development”; and the EU’s financial assistance research and innovation has been increased significantly. As soon as the Baltic States lack adequate financial recourses, some serious analysis shall be undertaken to prioritise limited funding along the most vital for national competitiveness’ directions in growth. Some new R&I directions have already appeared in the EU and the Baltic States, e.g. “human brain project”, which provides additional understanding of the human brain and its diseases, as well as perspective directions in graphene and quantum research. But the Baltic States and Latvia have to figure out their own specific and progressive R&I spheres corresponding to the existing national needs and priorities. Science, research and technology represent new facets in business development, as well as in entrepreneurship’s perspectives in national (and the Baltic States, in particular) political economy. (5)
There are also inherent connections between the European social market economy and new aspects for business and entrepreneurship. European approach to social market economy’s perspectives encompasses a variety of forms for businesses and organisations: e.g. SMEs and cooperatives, mutual benefit societies and non-profit associations and foundations. A common denominator in all of them is that their activity is constantly addressing people and society’s interests to produce positive impact on local communities and pursuing social causes.
5. The ongoing recovery and resilience process in the EU member states is closely connected with the progressive development in entrepreneurship and business; most often the process is called “work smarter, not harder”. At the present turbulent times and, in particular after-corona virus crisis, unprecedented approaches and specific decision-making in all spheres of socio-economic growth are needed. Under coherent reforms, the scientific community is the only valuable resource in the EU and in the member states to help the governments in formulating optimal answers to new visions in changing policies, governing structures, businesses and universities.
Any business activity is closely connected to the state’s existing and potential natural and human resources, e.g. land, climate, labor and capital, to name a few. Most important still for entrepreneurship is the “spirit of innovation and risk-taking” combined with the general nation’s ability to perspective growth and survival in the global competitive market.
Usually, the following “seven ways” of a proper entrepreneurship are usually mentioned in a traditional approach to business: creativity, critical thinking, and ability to face risks, personal independence, safe management, personal branding and social connections. (6)
The EU institutions have already introduced some priorities in the national recovery and resilience plans (RRPs) to coordinate EU-wide efforts in tackling the pandemic effects and support growth, e.g. national compulsory budget share shall include 37% funding for climate change actions and 20% on “digital economy and society”. These priorities are having serious challenges to traditional business strategies and management. Besides, complex EU’s post-pandemic measures are aimed at assisting the member states’ governance through their RRPs’ preparation and corresponding transformations of entrepreneurship.
Under the new recovery instrument, so-called NextGenerationEU, the Union institutions are supporting the member states’ investments and reforms which are essential for a sustainable resilience trajectory. Thus, following new EU supporting programs totaling about €2 trillion, the member states will be able in the coming years re-design national recovery plans which would inevitably include sustainable, green and digital transition; such transition opens tremendous new opportunities for business and “the spirit of entrepreneurship”.
6. Revealing some interconnected aspects of business, economy and society’s development in post-pandemic: national governance’s reactions presently have shown all the complexities and controversies of the post-pandemic’s effects on the socio-economic issues in the EU states. The “situation” has turned in some states into a “quiet acceptance” of huge financial injections from the EU; the member states in “post-pandemic planning”, regardless of certain volatility about the aftermath’s perspectives, are having a common denomination: national growth and entrepreneurship shall have a different pattern as the world after coronavirus will be a different place! In this new pattern, the role of optimal business’ arrangements is becoming ever more important.
It is clear that politicians at all levels will be asked by the citizens to forcefully manage the crisis with quick recovery to follow. It can be done in two ways: repeating former actions by throwing a lot of money into “old economy”, or create a new approach with “smart growth”, green and digital economy. It is a huge opportunity for both the states and the EU institutions to re-direct national economies towards a new European growth strategy based on “green deal”, coherent digitalization and sustainability to increase states’ resilience.
In analysing corporate perspectives in a modern national “triangle” – through business, economy and society – it is more feasible to use a more “adaptive instrument”, i.e. an analysis through “ideology and anatomy” of business. This approach also reflects modern challenging issues in business, social-economic development and corporate strategies, such as “smart specialisation strategies” business technology, which represent some of the most fundamental transformations in contemporary national governance. Besides, other modernising business and society’s inter-relations are becoming visible in re-directing and “converting” national economies on sustainable way through digital transformations, changing working conditions and corporate management.
Some other transformations are on the radars in the national decision-making process: the governance’s structures are struggling to keep to the general and fundamental socio-political connotation in the modern development strategies of preserving peoples’ health and wellbeing.
7. Revealing one of the vital aspects in business “survival”, i.e. corporate taxation, both in European and globally is of utmost importance too. It has been generally acknowledged that both the sources of international tax system during the last century and some basic concepts of tax residence have been outdated. However, some problems occurred due to modern digital transition: for example, it is a common feature in advanced business practices, and is regularly carried out in “favourable” states, without being physically present at “the making-place”; the digital transition in economies has also led to new opportunities in manipulating traditional taxation principles through numerous tax planning/facilitating schemes.
Current corporate taxation regimes are unable to provide a stable and just system for governments trying to impose counter measures to prevent tax avoidance and evasion. Global and European community is anxious to create a just system through a unanimously agreed approach to corporate taxation; the EU states are also interested in the global discussions’ outcome, as corporate taxation is, generally, within the hands of the member states’ governance structures.
8. Reflecting the EU’s efforts in streamlining the member states’ industrial policies and businesses through challenges and reforms. Industry is a key and important part of the EU and the member states growth: the sector includes tens of vital industries active in energy and aviation, construction and health, in motors and tourism, in pharmacy and manufacturing, etc. Together with the European “twin transition” through climate neutrality and digital economy, new European industrial strategy ensures increased role of industrial sectors in the states’ recovery and resilience plans.
Besides, this part of analysis attracts attention to the new industrial strategy’s implementation in the member states with the corresponding alterations in innovative businesses. It is evident that progress in the EU member states is mainly based on industrial sectors’ development: the term “industry” presently includes in the European realm several socio-economic sectors: from manufacturing and agriculture, to ICT, tourism, retail trade and public health, etc. However, the EU’s Treaties depict “industry” as just a “supporting Union competence”: which means that this vital sphere of national growth rests solely in the hands of national governance, the fact that makes industrial strategy’ implementation rather complicated.
References and notes
1. Reference to: https://www.politico.eu/wp-content/uploads/2022/04/07/FF55-as-crisis-response_final.pdf?utm_source=POLITICO.EU&utm_campaign=4779a4c629-EMAIL_CAMPAIGN_2022_04_07_04_31&utm_medium=email&utm_term=0_10959edeb5-4779a4c629-189017225.
2. More in: https://www.janisroze.lv/lv/gramatas/akademiska-un-profesionala-literatura/ekonomika-uznemejdarbiba/latvia-in-europe-and-the-world.html
3. Source: https://ec.europa.eu/info/strategy/priorities-2019-2024_en
4. Source: https://www.smallbizgenius.net/by-the-numbers/entrepreneur-statistics/
5. Source: http://www.businessdictionary.com/definition/entrepreneurship.html#ixzz3xv9ci0nt
6. Reference to: https://www.entrepreneur.com/article/290269; some arguments against such “enumeration” can be seen in: https://www.shopify.com/encyclopedia/entrepreneurship