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This Is What’s Holding European Startups Back

June 14, 2016, 6:40 PM UTC

These days, every region wants to foster innovation, to be a hub of technological development that attracts aspiring and established entrepreneurs. Europe is, of course, no exception.

But startups based on the continent are up against one especially high hurdle that Maelle Gavet, executive vice president of global operations for The Priceline Group, laid out in stark terms on Tuesday.

Speaking at Fortune‘s Most Powerful Women International Summit in London, Gavet, whose company owns travel sites such as Priceline.com, Kayak.com and booking.com, said the European Union’s effort to create its much-touted “single digital market” is “the biggest question for tech startups here in Europe.” The issue, she says, is that any startup that wants to reach “critical size” in Europe, must deal with regulation that differs from country to country.

“Sometimes you just move 200 miles and that’s it—you have different tax legislation, you have different labor laws, it’s completely different,” she says. Only big businesses like hers have the manpower and financial means to actually work within those varied regulatory regimes. “If you’re a small startup with five people it is very unlikely that you’re going to be able to adapt to—[say]—15 different [sets of] legislation,” she said.

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The European Union has made efforts to bring a more uniform approach to technology in its member states. Earlier this month, for instance, the EU introduced new guidelines that encouraged national and local authorities to ditch the patchwork of regulatory actions that apply to sharing economy startups like Uber and Airbnb, saying that the current rules have created uncertainty for companies and consumers alike. But those rules are non-binding; they simply state the EU’s stance.

The toothlessness of such actions can exacerbate the problem, says Gavet, since countries tend to take those EU suggestions and adapt them to their own local markets. “And though I do understand why countries want to do that; because they want to keep ownership,” she says, but it doesn’t help solve the problem of Europe’s decentralized regulatory system.

The issue isn’t just a headache for entrepreneurs, Gavet says; it’s weakening the continent’s competitiveness. “This is one of the biggest disadvantages that Europe has versus the U.S.,” she said. “In my view, [this is] one of the biggest reasons why European startups are usually not as successful as American ones.”