From medtech to semicon, from solar to quantum, Europe does not lack innovation. What it does lack are the conditions to turn inventions into globally competitive industries at sufficient speed and scale. For many companies, solving that problem could mean looking beyond Europe. But doing so without losing long-term strategic value requires a smart approach.
Many top-tier technologies are being developed in our small country, the Netherlands. A relatively small economy has built world-class positions in semiconductors, photonics, agritech, water management, and energy systems. And across Europe, companies and research institutes continue to generate critical technologies that sit at the heart of global value chains. The quality of our technology is not the problem. But without successful full-scale commercialisation it does not have much value.
For many European deep-tech and industrial companies, the path from validated technology to global scale is still harder than it should be. Investors are cautious. Procurement cycles are long. Regulations remain fragmented. Public funding is often complex and slow. In other words, the barriers keeping you from scaling are piling up. This creates a familiar dilemma.
Europe is good at going from zero to one. But it is much less consistent at going from one to one hundred.
Nothing new: The European paradox
This challenge has a longer history. The term European Paradox emerged in the 1990s to describe Europe’s apparent difficulty in translating strong scientific performance into commercial success. While the concept was contested, the underlying concern remains relevant today. Europe’s challenge was never simply about technology transfer from universities to companies. It was about building the ecosystems that allow innovation to scale: access to capital, manufacturing capacity, supplier networks, talent, customers, and industrial momentum.
Thirty years later, many of the structural obstacles identified by policymakers remain familiar. Europe continues to produce excellent technology yet often struggles to create the conditions under which that technology becomes a globally dominant industry. Policy initiatives like EU Inc. to consolidate the fragmented markets of member states are welcome but remain ambitious in the short term. As a result, various companies look beyond Europe for the scale they cannot find at home.
Looking beyond European borders
China is a recurring example in business discussions as an industrial base to scale your production. For certain technologies, China offers what Europe often lacks: manufacturing density, supplier depth, engineering speed, capital intensity, and large-scale demand. For companies seeking to industrialise rapidly, those advantages can be highly attractive.
Yet this creates a dilemma. The same ecosystem that helps a company scale can also help future competitors emerge. The solar industry illustrates this most starkly. German equipment maker Centrotherm — at its peak the global market leader in solar cell production systems — supplied turnkey manufacturing lines that allowed Chinese firms to build out production capacity without developing the underlying process knowledge themselves. China built a full industrial ecosystem around what it had absorbed, drove down costs at scale, and flooded the global market. Centrotherm filed for bankruptcy in 2012, brought down in part by the oversupply it had helped create.
The lesson is not that engagement with China was a mistake. It is that innovation is not protected by patents alone. Competitive advantage is embedded in manufacturing know-how, supplier ecosystems, engineering routines, quality control, customer relationships, financing, and accumulated learning. A company can retain ownership of its intellectual property while gradually transferring the capabilities that make industrial leadership possible.
A company can keep its innovation and still lose its market.
Leveraging China for global growth
None of this means European companies should avoid China. For many sectors, that would be unrealistic. China remains too important as a market, supplier base, manufacturing environment, and partner for industrial capability. The more useful question is: under what conditions does China strengthen a company’s long-term position rather than weaken it?
Answering that question requires more rigour than many firms apply before entering partnerships or licensing agreements. It means understanding which capabilities are genuinely strategic, where knowledge transfer occurs in practice, and how a relationship may evolve over time. For European companies facing this dilemma, the challenge is not whether to engage with China, but which form of engagement best supports their broader growth strategy.
Through China Inroads, we help founders, boards, investors, and leadership teams evaluate where China can add scale, where it may create dependency, and which collaboration model best fits their technology, sector, and ambitions. That may involve contract manufacturing, licensing, joint development, minority investment, supplier partnerships, or, in some cases, a decision not to proceed at all.
The objective is not China engagement for its own sake. It is identifying the structure that accelerates growth while protecting the capabilities that create long-term value.
Scaling in China with a smart approach
Europe’s scaling challenge is real, and it will not be solved overnight. Addressing it ultimately requires stronger innovation ecosystems: deeper capital markets, more integrated industrial networks, and better pathways from invention to scale. If Europe wants to capture more of the value it creates, those foundations remain essential. But companies cannot wait for structural reform to materialise. They need growth strategies that work under current conditions.
For some, that will mean leveraging ecosystems beyond Europe, including China, as part of a broader global strategy. The challenge is doing so without undermining the capabilities, knowledge, and industrial strengths that made the company competitive in the first place. This is the tough spot where China Inroads creates clarity for business leaders. Engaging smartly with China to build European innovation and serve the world, without losing your market.
