Innovation and Competitiveness clusters Policy in France

1. Innovation and Competitiveness clusters Policyin France Alain GRIOT TUSIAD SEMINAR Istanbul January 6 - 2009

2. 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..

3. 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)

4. 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,…:

5. 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 expenses • The 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.

6. 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 rebates • Exemptions 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 JEI • The scheme started in January 2008

7. 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 projects • To simplify the innovation financing frame, with a single financing point • To offer companies an unique interlocutor all along their life • A new unit has been created within OSEO Innovation • Dedicated to cooperative projects • For aid amount of up to 10 million Euros • This 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

8. 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 figures • 2005 2006 2007 • Number of projects 1 400 1 622 1 430 • selectivity 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 330 242 282 • Amount for poles projects 199 175 191

9. THE COMPETITIVESS CLUSTER POLICY

10. 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, …;

11. 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 !

12. Where are they? The Competitiveness Clusters in France. 17 are global ones 54 are national

13. 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

14. 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

15. 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

16. 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.

17. 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 2009and signed before the end of June 2009

18. Fore more informationon french Competitiveness clusters: www.competitivite.gouv.fr Thank you for your attention