What Can We Learn from National Innovation Metrics? France as a Case Study in Change

By: Arnaud Groff / Jean François Lacoste-Bourgeacq

National innovation statistics are regularly produced to make some Government agencies feel good about themselves and others feel bad – but do they really tell us how to make innovation happen more easily? In the first of a two part series we see how the French example holds salutary lessons for companies and governments.

Starting an innovative business in France looks pretty easy, thanks to pro-innovation policies. The network of public structures supporting innovation is very dense. It is comparable to that of countries that are recognized as the most innovative in the world. Moreover, the quality of academic research and elite levels of education are high.

So why is France hardly seen as a benchmark for innovation in the international rankings? For example, INSEAD  Global Innovation Index for 2008-2009 ranks France only 22nd out of 132 countries. We wanted to know how such a paradox could happen. First, we have analyzed briefly how most innovation indexes were designed and tried to understand their scope. Behind this analysis, our goal has been to identify if these indexes are covering comprehensively what innovation means and what can nurture it at a country level.

We discovered that the major indexes are mostly using the same criteria. patent data; R&D as a percentage of GDP; quality of the local research infrastructure; education of the workforce; technical skills of the workforce; political stability; macroeconomic stability; regulatory environment; popular attitudes towards scientific advancements; tax incentives; protection of intellectual property; and many other measures.

Behind the impressive number of criteria, it is hard to clearly identify the levers that are needed to improve country innovation capability.

The second finding was that behind the impressive number of criteria, it is hard to clearly identify the levers that are needed to improve country innovation capability.  We are drowning in a mass of data and it is sometimes difficult to understand the final standings and the way the different criteria are weighted or what they mean for action.

Finally, are the criteria really useful to policymakers to efficiently implement measures supporting innovation? Do they really help to identify key areas for improvement?

Innovation can solve some of the critical challenges that our world is facing today, particularly if it is oriented toward sustainability. It is considered as a key element of a Nation’s competitiveness.

One major challenge for a nation is to take into account is the right levers that can be used to encourage and sustain innovation throughout its territories. In our view the indexes of innovation we currently rely on do not provide the information that policy makers, people and companies need. They do not inform a real way forward. The rest of this article explores that issue and what we really need to know about our capabilities, using Frances an example.

Innovation requires a cultural mindset that allows it to thrive. This is true for a nation, in the first place. If we take the example of France, in the past, innovation has been used to extend territories and French revolutionary values. After World War II, France had to recover from its loss of influence and to understand that it was a new era. Unfortunately, the French spirit has been (and is still) languishing in the past and has kept a centralized bureaucracy to rebuild its broken economy. This is hitting some limits in the network age and is not favorable to make innovation ubiquitous throughout territories. But France is now part of Europe. It can take advantage of interdependent relationships with other countries within the European space which emphasize global cooperation and focus on sustainable development.

The French spirit has been (and is still) languishing in the past and has kept a centralized bureaucracy to rebuild its broken economy.

We will address the significance of ‘national’ innovation measures and their value in this context. What are the four critical levels of investigation that can lead to truly change-making actions?

Level 1 Challenges: Territorial Innovation

The 1st level shapes the way territories are organized to nurture  innovation enablers.

While social diversity exists in France, the situation is more varied when it comes to talking about social mix – the interaction between people in different social categories. It could be a great catalyst for development, but it is considered as a brake. Most of time, this is related to the fear of falling down the social ladder instead of climbing up.

Relations with neighboring territories depend on socio economic status. If there is a gap when considering  professional skills, wealth and generally speaking position in the social ladder,the chances are that there will be separate territories interacting with hostility, even though they are part of the same nation.

What will the wealthiest inhabitants of the eighth and sixteenth districts of Paris will be ready to share with the poorest suburbs of northern Paris?

What will the wealthiest inhabitants of the eighth and sixteenth districts of Paris will be ready to share with the poorest suburbs of northern Paris? Taking the risk to change the system to create an equilibrium is too overwhelming for the wealthiest. They could see their entire social life/network disintegrate.  This is even more critical because French politicians do not invest properly in the poorest territories and fail to create connections and meaning. The lack of infrastructure and the struggle for survival crystallize hostile behavior detrimental to any developmental initiative. This comes from an inability to innovate socially. We collide with antisocial codes, behaviors, privileges The challenge behind this is simple. It is about creating a fertile ground that attracts innovators. When you have a weakened social ground, it will hardly favor innovation initiatives and favor emigration of innovative people to countries with a more fertile ground.

Level II Challenges: The Innovation Support Structure

They are some other critical factors that weaken innovation initiatives in France. They are related to the design of the innovation support structures and to cultural specific features.

• France has a network of public structures too complex to support innovation: Different agencies provide the support of innovation at different levels. There are structures at departmental, regional and national level. Quite often these structures are partitioned. They have their own prerogatives and their own budget, resulting in a string of very public fragmented funding where entrepreneurs find it difficult to navigate. Sometimes it is better not to engage in time-consuming administrative procedures with the prospect of only getting modest aids. According to unofficial sources, all of these facilities employ approximately 200 employees by region. These employees are rarely from the world of business or, in particular, from the innovative companies.

• France likes large technology innovation programs: These programs are mobilizing a large proportion of public funding and principally of benefit to large French industrial groups. They come from a close collaboration between engineers and staff and may lead to projects whose value is disputed within the scientific community itself: megajoule laser, nuclear fusion reactor…

• Support is still too focused on R&D: In the land of Descartes, most supportive structures to innovation are actually on the R&D and technological innovation. Thus, the research tax credit allows companies to significantly reduce their cost of operations research and development, while recovering a significant percentage (up to 50% the first year) in research and development costs. Obviously, only the costs of R&D (basic research, applied research, experimental development) are taken into account. Similarly, OSEO, a kind of public bank supporting SME’s innovation and growth, which plays a role of a key driver for innovation in France, focuses on financing projects of technological innovation. All this takes place while the regular reports of Booz Allen Hamilton shows that there is no clear relationship between R&D and economic performance.

• There is too much dispersion of innovation utilization systems for public research: The result is a real difficulty of transfer from public to private. This is exacerbated by the fact that most of the people hired in the technology transfer structures have  mostly administrative background rather than commercial experience in innovative companies.

Level III Challenges: The education system

At a third level, innovation capability is leveraged by the education system. The French education system stigmatizes failure and crushes the desire to take risks, the desire to undertake and, thereby, to innovate. It is a machine to create conformity and to maintain existing social structures. It forms poorly and selects a lot. Selection is on the mastery of abstract subjects. If the child is not good at math, for example, the school system will have difficulties to propose alternatives. The system is deeply inequitable and does not provide any other orientation field which is equally rewarding. France only uses one model of “success” that is valued among children and does not let creativity and risk-taking play their role. Education is unable to empower any future citizens to build and define their own vision of what success can be. Beyond the model of success, the French education system fails to train to take risks, and innovation can not exist if there is no appetite for risk.

Most of the French college students, and particularly the ones getting into the French “Grandes Ecoles” (French “Ivy league”) come from the wealthiest families who have been following the successful strategies to comply with  the dominant model of education. These children grow in protected environments where parents invest a lot in tutoring at all stages, including the earliest ones. These children do not need to take risks to climb the social ladder. Their parents take care of that, thanks to their networks and their strategies.

Surprisingly, French children coming from the wealthier families will join the most prestigious colleges without paying too much.  Centrale, Polytechnique, Supelec are free. Subsequently, the French government takes over, largely by subsidizing the networks of excellence. According to Eric Maurin, director of studies at the “Ecole des Hautes Etudes en Sciences Sociales”, a year of training at French “Ivy league” costs about 30,000 Euros to the taxpayer. The children joining these colleges develop an ability to think quickly, to work hard and without questioning too much.

They are prepared to manage, not necessarily to be creative or permeable to original ideas. Luc de Brabandere, managing director in BCG’s Paris office, defines these children as the “GPS generation”. They have lost the sense of “feeling” things because they have been given a GPS that has made them lose this ability. They are unable to independently choose their own creative directions, by interpreting their environment. Meanwhile, a significant fringe of children who have no hope of salvation than taking risks to climb the social ladder  do not receive the same assistance from government education system.

Ideally a mix of these two populations, which would stimulate the urge to bite life, take risks, to change things, in short, innovating, would be ideal.

Some other aspects of the the education system have to be taken into account:

• Real difficulties to work in a collaborative mode: As more and more innovation projects are carried out in a collaborative mode, the training of managers is based upon the acquisition of theoretical technical knowledge. Junior engineers or researchers are joining companies without having gained any hint of the way to lead a collaborative project.
• France discourages young people to pursue careers in research: Public research offers few jobs, poorly paid compared to the number of years of education (24000 Euros in early career, and about 48000 Euros for the highest grade of assistant professor). Private research is sluggish and does not create a lot of researchers’ jobs. What can motivate young people to do research in these conditions? Especially since the long years of research training are hardly recognized in the calculation of pension rights recently reformed. In some areas the situation is farcical. For example in biotechnology, public research laboratories are able to invest in very expensive equipment when they are unable to offer decent employment contracts for their post-doctoral researchers.

Level IV The French innovation management system

The way companies are managing innovation and the people who are orchestrating it is the last building block of our innovation evaluation  system. But it cannot be considered independently from the different levels discussed above.

• • The influence of caste related to French “Grandes Ecoles” networks when it comes to manage the largest French companies or the innovation policymaking structures: These castes are competing fiercely with the power and benefits that go with it. They are controlling the government structures that are supporting innovation. The classic case is the battle between researchers from the medical world and those from French “Grandes Ecoles” in the field of life sciences, where France has accumulated a certain delay. This fight slows the development of effective approaches to support innovation by maintaining a status quo-preserving interests.
  • The French venture capitalists like risk … but in moderation: This is coming from the too negative judgment that high educated French people have about the ones who have failed. In France trust is earned, whereas in the Anglo-Saxon world it is lost. The venture capitalists are betting more on men than on innovation project. And they will find it difficult to lend to people who have suffered failures in previous projects, even if these failures are an invaluable source of enlightening experiences. Moreover, the French venture capitalists often have a portfolio logic that leads them to favor more development projects than truly innovative projects.
  • The private groups do not relay the activities in basic research: While the large private French companies tend to cut their numbers of researcher, they are more inclined to enjoy the benefits of public research without contributing significantly to its funding.

The consequence of the two preceding factors is that the large French groups tend to stifle the creation and development of young innovative companies.

• The system for evaluating researchers keeps them away from the real world: their potential contribution to the creation of innovative firms is less appreciated than publications in prestigious scientific journals.

By Jean-François Lacoste-Bourgeacq and Arnaud Groff