Innovation and Competitiveness clusters Policy

in France

Alain GRIOTTUSIAD SEMINARIstanbul January 6 - 2009

French industrial situation

Too small number of SMEs

Too large proportion of very small enterprises (more than 85 % of companies have less than 10 people);

low specialization of industry;

small and medium enterprises (less than 500 staff) are representing only 16 % (2004) of industrial research expenses;

Strategic positioning :

to fight against low wages countries, the solution is to increase competitiveness of the economy by promoting breakdown technologies, therefore to encourage innovation..

French innovation situation

The aim: increase research and development expenses in companies in order to reach the Lisbon agenda objectives: 3% GDP for R&D in 2010.

But French SMEs are underperforming regarding their European competitors:

19,7 % of French SMEs are investing in R&D in house (32 % in Germany and 30 % in Sweden); 35,9 % of French SMEs are investing in non technologic innovation (53,9 % in Germany and 44 % in Sweden).

To increase the industrial R&D expenses is mandatory : Lisbon objective: 3 % of GDP in 2010 , French situation 2,11 % (European Innovation Scoreboard 2007) French Private expenses in R&D are too small R&D ( 1,32 % of GDP, vs1,76 % in Germany, 1,87 % in the states et 2,40 % in Japan)

0,1% increase in R&D intensity leads to the creation of 0,3 to 0,4 % regarding the GDP per inhabitant » (European Commission, 2005)

The tools for a performing innovation policy

The innovation policy is a mix of :

- tax relieve measures for innovative enterprises and investors

-Direct financing for projects

-Involvement of all level of public authorities: the central government, the regional authorities,…:

Tax measures: a main reform, the research tax credit (CIR)

CIR is a tax rebate for companies investing in R&D, with the objective to increase the private R&D expensesThe scheme has been ameliorated in 2008, in order to be more attractive for companies; they can now:

Benefit of reduction of 30% of their expenses up to 100 millions euro, 5% after this threshold For companies investing for the first time in R&D, the level of rebate is upgraded to 5O% the first year of application, 40%% the second year. The reimbursement can be immediate (and non during the year following the expenses) if companies are considered as young innovative enterprises or growing companies (more than 15% growth/year)

In 2005, 5400 companies, investing 13.5 billion euro in R&D were benefiting of the scheme, for a public cost of 981 million euro.

40% of this amount was dedicated to companies of less than 50 staff For the coming years the estimation for the cost of the scheme is 3 billion euro/year.

Performing measures for SMEs: the young innovative enterprise (JEI) and the young university enterprise (JEU)

status.The young innovative enterprise status:

5 criteria of which: Less than 8 years old, More than 15% of total expenses dedicated to R&D Advantages:

Tax rebatesExemptions of social contributions for the employees taking part in research

A significant result (2006) : 1700 companies, staff concerned : 9600 budgetary cost for the State: 92 million euro

The Young university enterprise status: own for more than 10% by a student ore a searcher, for the valorization of research works of high grade education bodies (universities, high schools) the JEU is benefiting the same advantages than the JEIThe scheme started in January 2008

Direct financing: the new OSEO Agency

January 2008: merging between two agencies: AII and OSEO :to give a new impulse to R&D in high potential SMEs and allow the creation of more intermediate enterprises (staff between 250 and 5000) in breakdown technologies sectors, To promote the partnership in innovation projectsTo simplify the innovation financing frame, with a single financing pointTo offer companies an unique interlocutor all along their life

A new unit has been created within OSEO InnovationDedicated to cooperative projectsFor aid amount of up to 10 million EurosThis unit is in charge of managing, since the beginning of 2009, the financing of “poles de compétitivité” projects

The industrial strategic innovation (ISI) scheme allows to focus on collaborative projects concerning the more risky innovation

The National Research Agency

Under the responsibility of the ministry in charge of research: from a structural to a project based research financing

The scope: to finance research projects from the scientific community, on the basis of call for tenders and with a peer evaluation of the projects

A particular focus is put on private-public partnership and involvement of enterprises in the projects, with an objective of technology transfer and valorization of public research by the companies.

Some figures2005 2006 2007

Number of projects 1 400 1 622 1 430selectivity 27 % 25 % 25 %Finacing amounts (ME) 539 621 607% of SMEs 8,2 % 7,8 % 7,4 %% of large companies 9,2 % 9,9 % 7,7 %Number of poles projects 330 242 282Amount for poles projects 199 175 191

THE COMPETITIVESS CLUSTER POLICY

Policy aims

Identifying high-potential clusters and focus public aids on them avoiding scattering of public subsidies

Strengthening the link between research & industry promoting industry-driven research programs developing the “triple helix relationship” between firms, research centres

and higher education institutions

Developing a full ecosystem Education, private financing (business angels, VC,…) IP management,

entrepreneurship, international development, …;

What are they? A competitiveness cluster is :

a gathering of firms, research centres & higher education institutions, working on joint projects (mainly R&D projects) with a dedicated governance body (non-profit organization), and with dedicated public oversight bodies

All « clusters » are different : different strategies different priorities (outside R&D) different organisations (1 to 10 dedicated staff)

...but they all have to: define an innovation and development strategy, and implement a road-map to achieve it favour SMEs development

Other priorities, depending on the cluster: education recruitment international partnerships service delivery toward SMEs... growth financing, …

Priorities must depend on the strategy !

Where are they?

The Competitiveness Clusters in France.

17 are global ones

54 are national

Key factors of success

Involvement of firms (as opposed to involvement of public authorities or to involvement of public research centres)

Public authorities have to help and support, but not decide e.g. the cluster strategy must be decided by the cluster governance (i.e.

firms) Each cluster needs a specific support policy (at local level)

i.e. no « one size fits all » ! All local innovation services must be cluster-oriented

i.e. it may request changing pre-existing organizations approach The cluster policy must be enforced in the long-term

e.g. time-to-market in R&D projects is a least 2 to 3 years cluster policy needs 5-10 years to get a strong impact

Pôles 2.0: the second stage of the policy

End of 2007 and early 2008: national evaluation conducted by Boston Consulting Group and CM International.

Evaluation of both the global policy and each cluster individually Methodology of evaluation of public policy

• Dedicated means• Consistency with other public policies (R&D and innovation)• Clusters selection process• Financing support processes• Policy management at national and local levels• Synergy between actors• First effects on local actors

Pôles 2.0: the second stage of the policy

Evaluation of each competitiveness cluster - 7 points of scope

• Economic and international strategy• Cluster government and animation, evolution of the cluster

population• R&D projects and firms-public research-training synergy• Territorial settlement and network strengthening, structural projects• SME’s integration and new enterprises creation• Human resources training• Green development approach

Pôles 2.0: the second stage of the policy

The main conclusions of the evaluation At the global policy level

Policy aims are validated The competitiveness clusters policy is recognized as successful Number of competitiveness clusters have created, during the first

phase a dynamics of cooperation between actors of innovation (Enterprises, Research Centers, University)

At the clusters level 39 clusters are fully in line with the aim of the policy 19 clusters have to improve some aspects of their operations to fulfill

the objectives of the policy 13 clusters need a large reconfiguration of their action in order to fulfill

the objectives of the policy.

Pôles 2.0: the second stage of the policy

Launched by president Sarkozy on 26th June 2008 (the Limoges Speech)

A new 3 years period ( 2009-2011) for growth of the clusters and to achieve world class clusters

Financing by the state for innovation projects: 1.5 billion Euros for the 3 years period

A stress on private financing involvement in the innovation process managed by the clusters

A stress put on SME’s involvement in clusters A strengthening of contract based relationship between clusters

and public authorities Strategic roadmaps Development of a competitive ecosystem Contract of objectives (to be negotiated before end of march 2009 and

signed before the end of June 2009

Fore more informationon french Competitiveness clusters:

www.competitivite.gouv.fr

Thank you for your attention