European Corporations

The Slow Continent

  • Why it matters

    Why it matters

    European companies could lose market share if they fail to keep up with fast-growing U.S. and Asian rivals, affecting economic growth and employment on the continent.

  • Facts


    • The world’s 10 most valuable companies are based in the United States and the top three, Apple, Alphabet (Google) and Microsoft, are worth €1.4 trillion, more than Germany’s 30 DAX-listed firms together, a Handelsblatt study showed last September.
    • A ranking of global competitiveness showed last year Germany slipped down a notch to fifth place, behind Switzerland, Singapore, the United States, and the Netherlands.
    • An innovation ranking from August showed of a total of 128 countries Switzerland, Sweden, Britain, the United States and Finland held the top five positions, while Germany came took the tenth position.
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Source Andreas Schalk Flickr 24313783210_5fd19b5e8c_o
Europe's biggest listed grow slower than most of their U.S and Asian peers. Source: Andreas Schalk / Flickr

A new study of the world’s 500 largest publicly traded companies in the world show that only a small fraction – roughly 23 or less than 5 percent – show consistent, organic growth in sales, a study by U.S. executive search firm Heidrick & Struggles concluded.

Those authentically fast-growing companies include well-known U.S. tech firms such as Apple and Google’s Alphabet, but also Chinese insurer Ping An, U.S. pharmaceutical maker Gilead Sciences, India’s Tata Consultancy Services and Taiwanese chip maker TSMC. Some of the firms have been or are clients of Heidrick & Struggles, which is headquartered in Chicago and listed on the Nasdaq Stock Exchange.

The results showed that all but one of the companies came from the United States or Asia. The lone European company to make the list was London-listed and Dublin-headquartered biotech and drugs maker Shire. Although U.S. companies make up 39 percent, or 197 of the 500 most-valued companies according to a Financial Times ranking, they make up 16, or 70 percent, of the list of 23.

Two partners at Heidrick & Struggles – Colin Price and Sharon Toye – conducted the study with colleagues and summarized their findings in a book called “Accelerating Performance.’’

“With labor and capital rigidities (in Europe), we struggle to create fast growing companies.”

Colin Price, Partner and book author, Heidrick & Struggles

Differences in board structures, employment laws and developed capital markets were the main reasons to explain the U.S. overrepresentation on the list, Mr. Price told Handelsblatt Global.

“With labor and capital rigidities, we struggle to create fast growing companies,’’ Mr. Price, who is British and works in London, said of Europe’s challenge. “In the U.S., obviously there are bigger markets, but there is also more capital market support for rapid growth.’’

Flexibility and quick reflexes are key too, traits more typical to U.S. and Asian companies.

“In the U.S. there is greater ability to be agile,’’ Mr. Price said. “You can change the shape of your work force more easily.”

Six of the 23 fastest-growing companies were from Asia, reflecting the emergence of the continent’s middle class and growth of disposable income in the region that is “fueling high-growth companies,” said Mr. Price, a former McKinsey consultant.

The 23 firms showed consistent, exceptional revenue growth over three and seven years between 2009 and 2015, the study found. The researchers excluded from their list companies which made more than 20 percent of turnover from domestic government contracts, grew for more than 20 percent through acquisitions or at the expense of significantly lower profit margins. This prevented Amazon or Qualcomm, for instance, from making it on the list.

colin price – sharon toye Partners executive search firm Heidrick & Struggles source Heidrick & Struggles
Colin Price and Sharon Toye are partners at executive search firm Heidrick & Struggles. Source: Company

The authors’ analysis did not include privately held firms or smaller listed companies. In Germany, for instance, many businesses are family-owned and count among industry leaders globally, such as car parts maker Bosch, supermarket retailers Aldi and publishing firm Bertelsmann, the owner of Penguin Random House. In niche markets, Germany is also home to world leaders, but these companies have relatively low market values or are privately held.

The 23 corporations shared a strategy and organization that alerted them quickly to opportunities to boost sales, Mr. Price and Ms. Toye wrote in their book. Having the right leaders and employees is crucial, they concluded.

“What does a company need to go more quickly. First you think about production, digitization automation,” Mr. Price said. “Underneath all that is the people question: Is your person running digitization good enough? Are the two people running your biggest businesses cooperating so they can cross sell products? Underneath all business issues is always a people issue.”

When analyzing the 23 fast-growing companies, Mr. Price and his colleagues observed these organizations “put much ore efforts in building better people systems with less fear, less control, more engagement, more agility and more investments in people.”

One of the fast-growing companies, Tata Consultancy Services for instance, has a flat hierarchy, high worker autonomy, self-managing teams and a relatively small difference in pay between the lowest-paid and highest-paid employees, said Mr. Price.

“It’s time to recognize that ‘the soft stuff’ is really the hard stuff and to bring hard science to management,” Mr. Price and Ms. Toye wrote in their book, which offers analytical tools to measure how well-equipped an organization is to outperform rivals. “Moving organizational behavior into the realm of science is the core mission of this book.”

Mr. Price stressed the need for executives themselves to change first. “Nothing changes when behavior doesn’t change. That is the point I want to bring home to leaders,” he said. “The top team is the lead regulator, the carburetor of the engine. Unless you change the team you will not be able to change the rest of the organization.”


Gilbert Kreijger is an editor with Handelsblatt Global in Berlin, covering companies and markets. To contact the author:

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