These Three European Policies Leverage Immigration to Boost Entrepreneurship
Is it possible to turn a problem into a solution? Denmark, Ireland, Spain, the UK, Italy, the Netherlands, and France certainly think so: these EU members try to harness immigration to fuel economic growth by introducing special visas for prospective entrepreneurs to boost their economy. Natalie Novick analyzed the different policy models of these states to see which approach is the most effective and how likely is it that they reach their goal.
Novick identified three main types of startup visa policy models. Denmark, Ireland, Spain and the UK use the entry investor model: foreign entrepreneurs must convince state authorities that they have an innovative idea, a solid business plan, the capabilities to succeed and they will have a significant impact on the local economy. If they succeed, they still have to prove that they have the financial resources to invest in their startup company as they will not receive financial support from the government. The advantage of the early investor model is its low risk, only self-sufficient entrepreneurs have a chance to get a visa. The obvious disadvantage is the extremely low success rate: only 21 out of 285 applicants completed the process successfully in Denmark in the observed time period.
Italy and the Netherlands use the fairly similar hybrid policy. The main difference is the inclusion of the private sector in the selection process. Entrepreneurs are either allowed or required to apply for a visa through a certified incubator. The selection criteria are similarly strict to the entry investor model but the involvement of private sector increases the success rate: 40 out of 61 applicants succeeded in Italy and 21 out of 95 in the Netherlands.
France takes a fundamentally different approach from other countries. In the French quasi-incubation model, entrepreneurs are not expected to succeed more or less independently after their successful application for a visa. Instead, they are paired with incubators for 6 months long programs where they receive mentoring, legal advice and various other benefits like free office space. Furthermore, the French state provides financial support for them while corporate sponsors assist them with discount offers. The French model was by far the most popular amongst entrepreneurs: in the first year there were 1372 applicants but only 50 of them succeeded as the government capped the number of available visas.
All in all, Novick argues that the existence of these startup visas is a positive sign as they show a changing attitude towards migrant entrepreneurs. However, they will not have a significant impact on local economies as long as the selection processes remain so exclusive due to government risk aversion. Estonia offers a unique solution to this issue: the government introduced a digital residency program for foreign entrepreneurs which allows them to found companies, open bank accounts and manage their businesses without entering the country. The Estonian model proved immensely successful: 9853 entrepreneurs applied for a digital residency and over 95 percent of the applications was approved by the authorities.
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Contributed by Bence Juhasz.