legal and regulatory impediments. For example, U.S. companies are much more likely to be sued than their European and Asian counterparts, and many small U.S. companies, which lack the resources of larger companies, often settle rather than incur the high and growing costs of litigation. Fear of lawsuits also has affected the freedom of small U.S. companies to hire and fire employees; employment practices liability insurance has become a $100 million a year business. 88 In addition, U.S. companies face increasing health care costs and a wide array of federal, state, and local government regulations, not to mention a convoluted U.S. tax code. Nevertheless, it is virtually impossible to find a U.S. entrepreneur who would rather incorporate abroad.
The United States will continue setting the standard in the venture capital business for many years to come. No other country offers entrepreneurs as welcoming an environment to do business. U.S. start-ups enjoy ready access to institutional financing, the world's most liquid stock markets, a flexible labor market, a large pool of experienced managers trained in the world's preeminent business schools, strong intellectual property rights protection, a favorable capital gains tax, a bankruptcy law that does not permanently stigmatize those who fail, and a regulatory environment that allows managers to take substantial ownership positions in their companies through stock options.
In Europe, Britain will continue to outpace France, Germany, and other Continental economies in entrepreneurial activity. Prime Minister Tony Blair has embraced most of the economic reforms put in place by Margaret Thatcher and John Major in the 1980s and early 1990s that reduced high tax rates, promoted more flexible labor markets, and streamlined government regulations. The Blair government also has supported a number of new initiatives designed to encourage entrepreneurial activity, including a proposal to teach entrepreneurship in schools. 89 In France and Germany, on the other hand, the social democratic governments led by French Prime Minister Lionel Jospin and German Chancellor Gerhard Schröeder have put on hold many of the efforts by their predecessors to reduce high capital gains taxes, reform excessive and rigid