Business France publishes its Tech Book, which highlights France’s place in international rankings and provides an analysis of France’s entrepreneurial ecosystem. This is an opportunity to reflect on the strengths and weaknesses of the French start-up economy.

 

“The signs that France is strengthening her attractiveness, particularly in tech, are encouraging!”, explains Pascal Cagni, Business France’s President. This seems the obvious conclusion when digesting the five international and European rankings, compiled by Business France in their Tech Book.

 

This work aims to take stock of the French start-up economy’s assets, whilst also identifying the steps necessary to ensure France become a global leader in Industry 4.0. It is a must read in order to distinguish perception, understanding and economic reality. 

 

Beyond a mere analysis, this document lays out the methodology whilst also explaining France’s rankings. In fact, with these rankings providing a wealth of information, we must be aware that the choice of indicators and sources can have a significant impact on the kind of results we obtain. To take a clear example, the same definition of “start-up” does not always apply across the rankings.

 

France: land of research and innovation

The European innovation dashboard, published by the European commission, measures the way member states perform in terms of innovation and ranks them in four categories. France remains 11th and falls under the “strong innovators” group. Amongst its strengths are a highly skilled workforce and 44% of those aged 25 to 34 are educated to university level, against 30.5% in Germany. France also performs very well in terms of research, 11% of the most cited scientific publications globally, are French.

The dashboard also highlights the vast innovative and dynamic ability of French companies: they are squarely above the European average for the introduction of new products or innovative processes (ranked 10th in the EU). France is also the 6th largest exporter of high technology goods globally. French authorities have clearly understood the importance of research and the public sector’s R&D spending represents 0.74% of GDP (ranked 11th in the EU).

This political goodwill is also reflected in the “crédit d’impôt recherche”, a research tax break, which sees France as the most advantageous fiscal landscape for R&D in Europe. Another strength for the French economy is that French companies’ access to finance is more frictionless than elsewhere. According to EY’s capital barometer, French startups raised more than 2.5 billion euros in 2017, 400 million more than in 2016, meaning France is a strong second in Europe both in terms of money raised but also the number of financial transactions. “France, spearheaded by Paris, is carried by high performing financial systems and recognized research institutes which make it fertile land for budding businesses” summarizes Christophe Lecourtier, Director General of Business France.

An unquestionable entrepreneurial dynamic

France enjoys a solid entrepreneurial environment according to the Global Entrepreneurship Index, published by the Global Entrepreneurship and Development Institute, which measures a country’s ability to provide a strong entrepreneurial environment. France is 10th (out of 137) globally in 2018 and 7th in Europe. This dynamism is reflected in numbers: France was first in terms of company creation in 2015, ahead of the United Kingdom and Spain. She is host to 9500 startups and 591 000 companies were created in 2017.

According to the report, France particularly stands out in terms of “entrepreneurial ambition”: 18% of the population is considering starting their own company in the next three years, making this the highest figure of ant OECD country. Another notable asset of the French economy is its propensity for interconnectedness between competencies and companies, thanks to strong urbanization and high quality infrastructure. The support for innovation, tied in with a strong entrepreneurial will, make France a choice location for start-up creation. “France enjoys tax incentives for entrepreneurs and does not shy away from disruptive mindsets” says an enthusiastic Xavier Niel, founder of Iliad, Ecole 42 and Station F, the world’s largest startup incubator.

A digital transformation

The European Commission has also published another indicator, analyzing the evolution of its 28 member states, towards digital economies and societies, based on 34 indicators, divided into five groups: connectivity, human capital, individual internet use, technological integration within companies and online public services. France ranks 18th in a ranking dominated by Denmark, Finland, Sweden and the Netherlands. With 83% of the population using the internet (above the European average of 81%), France scores highest in the human capital section. This is no coincidence as France benefits from the cheapest access to high speed internet in Europe. France also scores well in terms of online public services: 67% of French internet users access public services online, against 39% in Germany and a European average of 58%.

A fifth ranking, the World Digital Competitiveness Ranking, published in 2017 by the International Institute for Management Development, looks at the digital transformation of countries, measuring the impact on governmental practices, economic models and on the wider society in general. France ranks 25th globally and 14th in  Europe. Often accused of being rigid, France’s regulatory framework is considered beneficial to digital development. Thus, France ranks 12th for the protection of industrial property rights, 17th for the respecting of contracts and 19th for ease of company creation. Finally, Paris is Europe’s second city in terms of the number of professional IT developers but also second for European tech workers after London.

Room for improvement

These rankings also highlight weaknesses in the French economy. Firstly, employment: with 14.2% of jobs in knowledge intensive activities (against 14.8% in Germany and 18.4% in the UK), the European Commission concludes that the innovative characteristics of French companies don’t translate into jobs as much as they could. A number of regulatory constraints are also highlighted. “Hiring and firing remain challenges to be resolved so that the current enthusiasm around start-ups become more than a short term trend” warns Ian Rogers, Chief Digital Officer for the LVMH group.

Among other areas for improvement, we note that the French rank low when it comes to identifying the opportunities for company creation that are available to the Global Entrepreneurial Index published by the GEDI. More also needs to be done in terms of internet connectivity. France’s connectivity level is below average, notably due to poor coverage for 4G, high speed and ultra high speed internet coverage (16% of French households enjoy ultra high speed internet).

Constance de Cambiaire