Following the Budapest declaration of November 2024 in which European leaders stressed the need for a new European competitiveness deal, the European Commission presented the Competitiveness Compass in January 2025. It is based on the recommendations put forth by Mario Draghi in his report on the future of European competitiveness. Given the European Commission’s renewed focus on strengthening competitiveness through innovation, reducing financial barriers, and supporting digital transformation, I explore in this blog the connections between the micro-entrepreneurship research field and the EU’s recently published Competitiveness Compass agenda.
One of the persistent challenges for micro-entrepreneurs is securing financing. Many face obstacles due to their small scale, lack of collateral, and restrictive lending policies. The EU’s Competitiveness Compass therefore highlights the need for reducing financial constraints to spur innovation and productivity. Alternative funding mechanisms such as crowdfunding, decentralized finance, and impact investing could provide new opportunities also for European micro-enterprises. At the same time, we need to find out whether public sponsoring of micro-enterprises could be (made to be) effective as well, for example by allowing more or better human capital formation in micro-enterprises to help them innovate and internationalize their business.
The European Commission underscores digitalization as a key driver of competitiveness-and it is. Yet, micro-entrepreneurs often struggle with digital adoption due to limited training and resources. While business training programs improve financial literacy and survival rates, they need to be more tailored to digital skills and related market demands.
Micro-businesses are critical players in Europe’s innovation ecosystem, but they face barriers in adopting advanced technologies such as AI, automation, and e-commerce. The EU’s Competitiveness Compass aims to close the innovation gap by enhancing digital infrastructure and ensuring that small enterprises can integrate technological advancements.
Women-led micro-enterprises are vital for economic growth, yet they continue to face financial and systemic barriers. The EU’s Competitiveness Agenda includes measures to close gender gaps in access to capital and market opportunities. However, there are some positive signs too: European venture platform Female Foundry just reported that – while declining 12% in 2024 from a year earlier – the trend in investments to female-founded startups in Europe was nearly in line with the decrease in overall venture investment, which was down 11%. Notable is that deep tech startups founded by women appear to be raising more than men in that area (source: Techcrunch.com).
Recent economic shocks, including the COVID-19 pandemic and the recent geopolitical instability, have demonstrated the importance of adaptability for micro-entrepreneurs. Businesses that diversify their income streams and adopt new technologies tend to be more resilient. Furthermore, strong social networks and local support systems are key to entrepreneurial survival during economic downturns. The Competitiveness Compass underscores resilience as a cornerstone of Europe’s economic strength.
While micro-entrepreneurship research has expanded in the context of developing economies, Europe lacks sufficient volume of empirical studies that address its unique market conditions. Given the EU’s urgent need to drive productivity and economic renewal, research should focus on evaluating the impact of public funding and policy instruments on micro-enterprise growth, identifying digitalization pathways that are most effective for European micro-entrepreneurs and assessing sustainability-driven business models for micro-enterprises in alignment with EU green policies.
The European Commission’s Competitiveness Agenda calls for reducing bureaucracy, fostering innovation, and supporting SMEs—including micro-enterprises. Policymakers should integrate micro-enterprise concerns into broader EU industrial and innovation policies and develop a Competitiveness Coordination Tool to streamline support programs at EU and national levels. It is also important to strengthen public-private partnerships to bridge funding and innovation gaps.
Micro-entrepreneurship is a key component of Europe’s competitiveness and economic resilience. However, unlocking its full potential requires more empirical research, targeted financial support, and digitalization initiatives that align with the EU’s broader economic strategy. Micro-entrepreneurship research needs to address both gaps in knowledge and policy design. By fostering closer collaboration between researchers, policymakers, and practitioners, we can create a more inclusive and supportive entrepreneurial ecosystem for micro-businesses and ensure that micro-businesses play a crucial role in supporting Europe’s economic future.
Read more:
Mike Butcher: The decline in funding has hit male and female-led startups equally, but women out-raise men in DeepTech. TechCrunch. 4.3.2025
Juliette Portala: Zaharieva sets out plans for a European Innovation Act. Science Business® 19.12.2024.
Author: Robert van der Have, Ph.D., Assistant Professor of Micro-Entrepreneurship, University of Oulu Business School and Kerttu Saalasti Institute
In Kerttu Saalasti Institute's blog we write about the topics of the Institute's research groups, micro entrepreneurship education and the Institute's general topics. The authors are researchers, experts and members of networks.
Our topics are: micro entrenepreneurship, future manufacturing technologies, regional excellence, micro entrepreneurship education