A proposed pan-European corporate form, EU Inc., could help Central and Eastern Europe (CEE) start-ups compete globally without hiding their origins. When the European Commission tabled its proposal for a 28th corporate regime in March, it sparked the usual pushback.
However, in cities like Warsaw, Bucharest, and Prague, the proposal is seen as a tool for economic emancipation and a way to counter the country-of-origin effect, a bias that associates Eastern European products with lower quality or higher risk.
The Country-of-Origin Effect
For years, CEE companies have used foreign branding to overcome this stigma. Examples include Gino Rossi, a Polish footwear brand with an Italian-sounding name, and Eveline Cosmetics, which uses Paris on its packaging for export markets.
This strategy, while effective, comes at a cost, as companies must invest in creating a Western image. Tech start-ups face similar challenges, with venture capitalists often applying a risk discount to companies based in the region.
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EU Inc.: A Unified European Identity
EU Inc. aims to address these issues by allowing founders to establish a unified European company online within 48 hours for as little as 100 euros. This would provide a single legal framework valid across all 27 member states, offering a Made in Europe brand that could shield start-ups from regional bias.
The European Parliament is currently debating the proposal, with German Socialist MEP René Repasi advocating for restrictions to protect national labor rights. While labor rights are essential, overcomplicating the framework could defeat its core purpose of making Europe more competitive with the United States and China.
Overcoming Geopolitical Stigma and Legal Barriers
Central Europe’s innovation potential faces bottlenecks due to 27 distinct corporate codes and lingering geopolitical stigma. Entrepreneurs often relocate to secure a ‘global’ stamp of approval, exporting intellectual property and tax revenues. A unified European corporate form could address these challenges by providing a single legal framework across member states.
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