334The deﬁning issue confronting the European Union for the past few years has been Brexit: The United Kingdom leaving the Union after 40 years. This is an issue of formation in the economy. Why the United Kingdom decided to leave the European Union has been studied extensively, with different scholars looking at immigration, a dysfunctional economy, regulation, the rule of law, and cultural differences. We can identify three major areas of concern: the economy, sovereignty, and culture.

The economic concern has been partly about the European Union as a dysfunctional economic entity. Innovation, entrepreneurship, trade, and employment policies have led to large disparities in Europe between the rich north and the much poorer south. Staying in the European Union would have pulled the United Kingdom down to the European level. The United Kingdom would not be able to realize its economic potential within a dysfunctional E.U. bureaucracy. According to Gramm and Toomey (2020), “Britain is leaving the European Union, which has trampled on British sovereignty, to escape its crippling regulatory structure.”

The second issue was the rise of nationalism around the world and the distrust of international organizations to deal with global problems like security, trade, ﬁnance, inequality, and immigration. The sovereignty issue revolves around questions of whether a country should live under the rules of an international organization like the European Union, or national rules. With the European Union tightening its grip on all member states, the United Kingdom had limited freedom to enact its own laws and regulations.

335The Digital Platform Economy and the Entrepreneurial State: A European Dilemma

Table 3 The four sub-indices of selected E.U. countries, the United Kingdom, and the United States Digital Digital infrastructure Digital user multisided Digital technology governance citizenship platform entrepreneurship France 63.5 64.9 60.3 65.3 Germany 67.6 70.3 56.3 63.1 Italy 40.7 50.3 46.1 47.3 Spain 54.0 53.1 52.5 53.7 80.1 81.3 United 83.5 84.8 Kingdom 80.7 92.2 United 79.0 87.4 States Source: Acs, Z. J., Szerb, L., Song, A., Komlosi, E., Lafuente, E. (2021b). The Digital Platform Economy Index: 2020, The GEDI Institute, www.thegedi.org Strengths and weaknesses in the EU are indicated in bold

The ﬁnal issue is cultural and revolves around national identity and nationalism, which includes but is not limited to issues of immigration and religion, and their impact on cultural identity. Young people that voted against Brexit were inﬂuenced by cultural diversity and their lifestyle as full-time students. No relationship was found with education (Ehsan & Sloam, 2020).

The question remains: Why did Britain vote for Brexit? Looking at an individual level analysis Clarke et al. (2017) found that both the economic inﬂuence and immigration-terrorism cost-beneﬁt factors played a very signiﬁcant role in explaining the vote to leave. However, what has not been carefully researched is what aspect of economic inﬂuence was important? Was it innovation, technology, entrepreneurship, type of industry, or human capital? What the DPE shows is that the United Kingdom has a rather strong twenty-ﬁrst-century digital entrepreneurial ecosystem but was stuck in a dysfunctional twentieth-century European Union bureaucracy. Looking at the scores of the DPE’s four determinants, the United Kingdom is almost identical to the United States (Table 3). In other words, the four determinants are almost identical. Germany, Italy, and France lag far behind. If we look at the four determinants, the biggest differences are in agency. One interpretation of this is that the United Kingdom has a very strong DEE, which was tied into the rulemaking structure of the European Union, which is itself amended to a twentieth-century version of the twenty-ﬁrst century. If the United Kingdom was to realize its economic potential, it had to extricate itself from the European Union. London is the home of the largest knowledge base in the world, hosting six of the top twenty universities in the world, the largest ﬁnancial center in the world along with New York City, and an increasingly entrepreneurial hub populated by globalized human capital. Therefore, the formation of the U.- K. economy has now been freed to focus on the economy of the twenty-ﬁrst century.

Germany is a different story. While the United Kingdom is a leader in digital entrepreneurship, Germany is a follower. This weaker position is holding Germany back from fully embracing a digital future. For Germany as the engine of Europe, the Z. J. Acs

336lack of startups is a hindrance, especially in the area of information and digital technologies. The auto industry shows clearly that existing ﬁrms will not introduce new technologies, and the entry of Tesla into Berlin (the information capital of Europe) is a shot across the bow of the European auto empire.

The German auto industry dominates the world in many respects, from the mass market to the luxury market, and even the racing world. If we apply the Jovanovic analysis to the German auto industry, we can understand the likelihood of the industry implementing new technologies. The industry would focus on product improvement, which would give it cars that were, in a sense, over-engineered. Hobijn and Jovanovic (2001) suggested that new technologies will not be implemented by existing ﬁrms because of awareness and skill; vintage capital; and vested interests. The German auto industry ﬁts this analysis like a glove. The industry is heavily invested in skills in the metal industry, engines transmissions, suspension, and steering, but there is a shortage of computer skills. Second, the huge investment in vintage capital prevents it from easily writing this investment off. Finally, the heavy investment in the governance of codetermination between labor business and government work councils makes meaningful restructuring almost impossible. This structure is reinforced by the top-down rules of the European Union. Tesla’s move to Berlin, arguably the digital capital of Europe, indicates that the future of the European auto industry may be with the startup and not the incumbent. Electric cars and self-driving vehicles are already here; they are just not necessarily evenly distributed. But the direction of change is clear and the only unknown is the rate of change. Once resource allocation decisions are redirected away from mechanical and diesel vehicles and toward electric vehicles that are cleaner and align with climate change priorities, the rate of change could accelerate very quickly (Monsellato, 2015). A deeper analysis of Tesla’s global growth provides greater insight into the speciﬁc advantages of the company’s business model, and why entrepreneurs like Elon Musk choose to incorporate in the United States. It therefore shows what obstacles restrict German innovation and entrepreneurship. Tesla serves as an unprecedented case study because different government regulations have made entrance to the sector harder, since there are different standards in safety, emissions, and standards. Recent history has proved that besides Tesla Motors, no new player has entered the automotive industry in a signiﬁcant manner in the last decades (Monsellato, 2015). Indeed, Tesla has achieved what few previously thought possibly: turning proﬁts on a premium-priced electronic vehicle (EV) with a developing supply chain that can potentially bring affordable and sustainable high-tech cars to the middle class. If successful, such a proﬁtable and tech-driven business model would enable a domino effect in innovation among Musk’s other companies, SpaceX and Solar City. Naturally, Tesla has utilized unconventional marketing to build its brand—a passion for transportation efﬁciency, high-tech adoption, and a sustainable footprint—and it has been noticed. Now, the Tesla Model S has earned numerous prizes like the Motor Trend Car of the Year 2013 and the World Green Car of the Year 2013 and The Digital Platform Economy and the Entrepreneurial State: A European Dilemma

337has chipped away at the market share of German luxury car makers (Monsellato, 2015). The great engineers at Tesla have fully embodied Schumpeterian entrepreneurship by identifying a need for EVs in the market, foreseeing the demand-desire and supply requirements, orchestrating a network of individuals with the knowledge and funds to create the new technology, and establishing strategic agreements with partners to scale commercialization and diversify output in the long run. Due to Tesla’s high degree of vertical integration, location in Silicon Valley, status as the sole car maker in the western United States, and exceptional human capital—in addition to Musk’s own credentials, he employs workers with backgrounds ranging from Ford to Cisco, Apple, Oracle, GM, and German car makers—the startup went from a niche concept shop to a global player with a successfully sustained stock price (Monsellato, 2015).12

4 Discussion

How do we interpret the evolution of the industrial structure and the rise of the digital platform economy? Political economy may have had a negative impact on economic policymaking regarding the ITR in the European Union. What do we mean by political economy? According to Brian Arthur (Root, 2020, p. xv),

Economics before 1870 was concerned with two great problems. One was allocation within

the economy: how quantities of goods and services and their prices are determined within

and across markets or between trading countries. The other was formation within the

economy: how an economy emerges and changes its structure over time. In the years

since 1870, and the development of neoclassical economics. . . allocation came to constitute

‘economic theory’ itself. Questions of formation thus faded from the central core of economic theory, and economics had little to say about adaption, adjustment, innovation, the formation of institutions, and structural change itself. The formation problem was not easily