Innovation fuels progress, and nowhere is this more evident than in the race between the United States and the European Union to shape tomorrow’s digital landscape. (source: Freepik)
The author, Matej Beňuška, is Managing Partner at PA Matters s.r.o.
In the digital age, technology is not just a tool—it is the foundation upon which the future is built. Innovation fuels progress, and nowhere is this more evident than in the race between the United States and the European Union to shape tomorrow’s digital landscape.
But as the world accelerates toward a more digital future, these two powerhouses are heading in different directions, leaving European businesses—especially small and medium-sized enterprises—struggling to keep up. Slovakia, a country brimming with untapped potential in the tech sector, is particularly vulnerable to these shifts.
The United States has long championed innovation, fostering a climate where technology thrives under market-driven policies. In America, ambition is met with opportunity, and bold ideas flourish with minimal interference. This is why Silicon Valley became the epicenter of the digital revolution, why artificial intelligence (AI) is evolving at breakneck speed, and why American companies continue to lead in everything from AI to cybersecurity. Meanwhile, Asia is emerging as a formidable competitor, with countries like China and South Korea investing heavily in AI, semiconductors, and digital infrastructure. The region’s mix of government-backed initiatives and aggressive private-sector growth is positioning it as a serious global contender—intensifying pressure on Europe to keep pace.
Europe, however, has taken a different path. The EU has prioritized regulation, focusing on consumer protection, fair competition, and digital sovereignty. On paper, this sounds admirable. The Digital Markets Act and the Digital Services Act aim to curb monopolistic behavior and create a level playing field. The AI Act seeks to prevent the misuse of artificial intelligence. The NIS2 Directive imposes stricter cybersecurity requirements. And of course, the General Data Protection Regulation (GDPR) remains a global benchmark for data protection. While each of these policies is well-intentioned, together they have created an environment where innovation is often slowed by bureaucracy and red tape.
For SMEs, this is more than an inconvenience—it’s an existential threat. Unlike tech giants with vast legal teams and deep pockets, small businesses cannot afford to navigate a complex regulatory maze. They must either divert scarce resources to compliance or risk falling behind in an increasingly competitive world. In Slovakia, where SMEs form the backbone of the economy, these challenges are especially acute. According to the European Commission, SMEs in Slovakia account for 99.9 percent of all enterprises, 70.7 percent of employment, and 61.2 percent of the country’s economic value added. Their central role makes them particularly exposed to the burdens of overregulation. Ambitious startups with the potential to drive European innovation are being stifled before they can even take off.
The growing divide between the US and EU is perhaps most visible in the field of AI. A recent Economist article notes how Europe’s AI market is lagging behind due to heavy regulation, while the US and China push the boundaries of what’s possible. Similarly, Politico has reported that European startups are struggling to compete globally as compliance costs rise, making it harder to attract investment and scale. In the US, AI is seen as the next frontier, with companies experimenting boldly and rapidly. In Europe, companies are forced to wait—hesitating until regulations become clearer. The result? A continent that once led the world in science and technology is now falling behind, watching from the sidelines.
This divide isn’t just about policy—it’s about mindset. A study titled Does EU Regulation Hinder or Stimulate Innovation? by Jacques Pelkmans and Andrea Renda, published by the Centre for European Policy Studies (CEPS), offers a detailed analysis of how regulation affects innovation in Europe. The authors argue that while oversight is necessary, the EU’s current framework may be overly restrictive, hampering especially SMEs’ ability to compete globally. Another report by the European Parliamentary Research Service (EPRS), The Impact of the General Data Protection Regulation (GDPR) on AI, highlights how data protection laws, though important, pose significant challenges for companies developing AI solutions. These findings underscore the urgent need for a more agile approach to tech governance in Europe. Where the US sees technology as an opportunity, the EU often sees it as a threat. This fundamental difference is why American companies are surging ahead while European firms remain cautious and constrained. For Slovakia and other small EU member states, this means being caught in a difficult balancing act between ambition and limitation, innovation and compliance.
But it doesn’t have to be this way. Europe can find a path forward that both protects consumers and fosters innovation. Instead of rigid, one-size-fits-all rules, policymakers should consider frameworks that support growth and give smaller companies the flexibility they need to thrive. Transatlantic cooperation could also help align standards, ensuring that European firms aren’t excluded from the global digital economy.
Slovakia has a choice. It can push for a smarter, more balanced EU approach—one that nurtures innovation rather than suppressing it. It can advocate for policies that empower rather than constrain. And it can remind Europe of its pioneering past—a place where the future wasn’t feared but embraced.
Originally published in Connection, the magazine published by AmCham Slovakia.
(source: AmCham)
