In 2024, the Nobel Prize in Economics was awarded to Daron Acemoglu, Simon Johnson, and James A. Robinson. Their work fundamentally centers on the critical role of political and economic institutions in explaining the vast differences in economic development and prosperity across nations. In a nutshell, their findings differentiate between inclusive institutions, which promote broad participation and secure rights and the rule of law crucial for sustainable growth, and extractive institutions, which concentrate power and wealth among an elite, hindering development.
A new world order
Since the beginning of 2025, the existing rule-based world order has been disrupted. Global rules of trade, as represented by the World Trade Organization and it’s legal framework, are increasingly ignored or questioned. In this case, the majority of economists and common sense are closely aligned: There will be no winner in this game. Stock markets and the overall investment climate are deteriorating and becoming increasingly unpredictable.
Mitigating risk, realizing opportunities
In such a climate, effective risk mitigation becomes paramount. Yet, the focus is not solely on risk. It is even more about capturing opportunities. Statistical data demonstrate that US Tech companies establishing a successful presence in Europe have yielded remarkable returns. A post-COVID study finds a revenue contribution of 28% from Europe, with the top performers reaching 40% by the time they go public. – What are the reasons?
What Europe can offer
North American tech companies can find numerous benefits in entering the European market. Key points include:
- Robust Growth in IT. – The need for Europe’s tech maturity to catch up with the US is – among other reasons – fostering growth. By 2030, Europe will represent approximately 30% of the global IT market. Total IT spending in Europe is expected to reach $1.5 trillion in 2030, growing nearly 9% year over year, with AI-related services a key driver.
- Growing Demand for Digital Transformation. – The digital transformation sector in Europe is projected to grow at a Compound Annual Growth Rate (CAGR) of 16.4% until 2030. Despite a lag in foundational AI development (only 6% in global patent registrations), Germany, as Europe’s leading economy, demonstrates strong and accelerating leadership in the practical application of AI solutions. This „AI paradox“ is characteristic of other European countries,
- EU Commission support. – The European Union actively supports the private and public sector in fostering a digital economy, notably through initiatives like "Digital Europe." Such programs are designed to accelerate the continent’s digital transformation and bolster its digital sovereignty.
- Favorable Investment Climate. – European nations have actively sought to attract foreign investment through incentives such as tax breaks, grants, and streamlined business incorporation processes. Countries like Ireland and Estonia, for instance, offer competitive corporate tax rates and are renowned for their pro-business policies. Furthermore, start-up ecosystems in cities such as Berlin, Amsterdam, London, and Stockholm provide fertile ground for innovation and collaboration, bolstered by government-backed initiatives and venture capital funding.
- Stability and Predictability. – The 27 member states of the European Union are governed by a relatively harmonized legal framework, particularily in areas like Data Protection (GDPR), the Digital Services Act, and the Digital Markets Act.
- Enhanced Brand Reputation. – Compliance with these benchmark-setting regulations not only fosters trust with European customers but also unlocks new partnership opportunities—for instance, along supply chains—and elevates your standing as a serious global player.
- Unrestricted Access to 27 Markets. – The EU’s principle of free movement for services, capital, goods, and people grants companies unparalleled access to the markets and workforces of all 27 member states. Furthermore, local and regional variations offer opportunities to optimize for differences in taxation, labor costs, and other operational factors.
- Diverse and Skilled Workforce. – A highly educated and diverse workforce will significantly benefit your company. Major economies like Germany, France, and the Netherlands boast robust engineering and technical talent pools, while nations such as Poland and Romania provide cost-effective expertise in software development and broader IT services.
Navigating the challenges
A deeper dive into the specifics of Europe reveals more favorable conditions. However, establishing a business in Europe is not without its challenges and risks. Therefore, such expansion efforts must be meticulously planned and guided by expert advice. North American IT companies, in particular, must be mindful of complexities related to developing effective sales and market entry strategies, navigating cultural and linguistic differences, addressing persistent regulatory complexities, and overcoming talent acquisition hurdles.
Conclusion
Amidst a tectonic economic shift and uncertainties in the U.S., Europe emerges as a compelling destination for IT companies. Its significant market potential, inherent stability, and strategic geopolitical advantages make this an exceptionally opportune moment to seriously consider expanding their footprint into the European market. By carefully analyzing specific opportunities within different European countries and developing tailored market entry strategies, companies can tap into a thriving and predictable environment for sustainable growth and long-term success.
