Value creation of startups in Austria
In a new study, EcoAustria presents suitable recommendations for action to increase the number of start-ups in Austria. Innovative start-ups play a particularly important role when it comes to promoting the overall growth potential of an economy. In an international comparison, however, Austria has a relatively low number of start-ups. Specifically, 687 startups and scaleups are registered per million inhabitants in this country. In a direct comparison with the top European countries, there are an outstanding 2,400 such companies in the Netherlands and a remarkable 1,811 in the United Kingdom.
In order to analyze the positive economic effects of an increased start-up rate for Austria as a business location, EcoAustria simulated an increase in the number of start-ups in these two leading countries:
Netherlands scenario:
In comparison with the Netherlands, this would mean an increase from 6,200 to 21,400 companies. After ten years, the investment and employment effects in this scenario would increase to 1.3 percent and 12,000 employees respectively, and after 20 years to 2.5 percent and 26,000 employees. In this case, GDP would be EUR 5.7 billion higher after ten years and EUR 11.9 billion higher after 20 years.
United Kingdom scenario:
If the United Kingdom is used as a benchmark, this would result in an increase from 6,200 to just under 16,200 companies. The investment and employment effects would increase by 0.8 percent or 8,000 employees after ten years, and by 1.6 percent or 17,300 people after 20 years. In this scenario, GDP would be EUR 3.8 billion higher after ten years and EUR 7.8 billion higher after 20 years.
The current challenges faced by domestic start-ups include restrictive regulations when setting up and accessing the market, as well as bureaucratic obstacles that arise later on. These relate to the sale of company shares, the introduction of investors or the incentivization of employees. Some of these hurdles are already being addressed in a reform package for a new flexible corporation. The aim: a simple, flexible and unbureaucratic formation procedure with legal certainty and investor protection. This includes measures such as electronic company formation and the option of submitting documents in English, which is particularly beneficial in the context of internationalization and attractiveness as a business location.
Another important role is played by the reduction of the minimum capital required to form a GmbH and a faster procedure for entry in the commercial register. As far as tax incentives for private equity are concerned, tax allowances or credit models can still be considered sensible measures.
The increased use of sandbox regulations is also an option worth considering in terms of increasing the flexibility of companies in the development of their products and processes. These can prove particularly useful in areas with high social and societal innovation dynamics.
Last but not least, the lack of availability of qualified employees is also seen as a particular hurdle for many start-ups. As the Austrian labor market is often unable to meet personnel requirements, the search is increasingly shifting abroad, which slows down the entire recruiting process. In addition to existing forms of regulation such as the Red-White-Red Card, further factors may be needed in future to position Austria as an attractive destination for foreign workers.
