Innovation and Competitiveness clusters Policy in France Alain GRIOT TUSIAD SEMINAR Istanbul January

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  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 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.

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

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

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 Number of projects selectivity27 %25 %25 % Finacing amounts (ME) % of SMEs 8,2 %7,8 %7,4 % % of large companies9,2 %9,9 %7,7 % Number of poles projects Amount for poles projects

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 ( ) 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 information on french Competitiveness clusters: Thank you for your attention