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Internet Entrepreneurship in Europe

Venture Failure and the Timing of Telecommunications Reform

Niko Marcel Waesche

From its launch in 1997, the Frankfurt technology stock exchange developed spectacularly as did other European technology exchanges. Many Europeans thought that a new age of entrepreneurship had dawned. Following the downturn, however, the search for blame began. Much of this blame was undifferentiated and subjective. Public policy lessons were not drawn. Written by a well-known commentator of the European venture capital community, this book analyses the rise and decline of European internet entrepreneurship. The effects of both the public promotion of venture capital investments as well as the timing of telecommunications reform are examined in detail in various European countries, in particular in Germany and Sweden. The book contains a wealth of unique data on the failure of European internet ventures and draws several technology and telecommunications policy conclusions.
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Chapter 7: Varieties of Internet Venture Development in Europe: The Swedish Case

Niko Marcel Waesche


The countries of Europe provide an excellent sounding board for hypotheses of uneven internet development. This is because a direct comparison between Europe and the USA would need to take into account several country-specific variables next to telecommunications liberalization, such as taxation, legal and other conditions for entrepreneurship and equity investing. One would need to, furthermore, understand the effect of regionspecific variables such as the dynamics of Silicon Valley and its venture capital community (Kenney, 2000b). A further important distinction between the United States and Europe was the size of the home market and the persisting difficulties and costs of cross-European business at the time, which were not limited to differing languages and multiple currencies. In contrast, when conditions for internet entrepreneurship are compared across the countries of Europe, significant differences existed only in terms of telecommunications liberalization and its impact on the local loop. Regarding the other country-specific and region-specific factors such as the availability of venture capital; deficits were the norm in Europe. Until the late 1990s, when the situation was transformed, European start-ups with new internet business models were in general not financed by venture capitalists. Exceptions were internet software developers and Internet Service Providers (ISPs). Furthermore, the low barriers to entry associated with the internet and its horizontal applicability meant that the usual set of national innovation criteria pertaining to the educational system did not apply. In this chapter, learning from the German case will be...

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