Global Enterprise and Innovation in France
EXECUTIVE SUMMARY
Innovation today is vital for the success of any multinational organization today crossing boarders as it needs to continuously innovate and adapt to the challenges of the new markets and the changes in consumer tastes and preferences. This study tries to access the NIS (National Innovative System) in France and what are the opportunities/bottlenecks for innovative firms. Kraft Foods have invested in R&D center in France and manufactures innovative products as per consumer trends. The study gives a brief on Innovativeness of Kraft Foods and discusses the NIS and business environment of France. Further the study discusses the various components of NIS including government, finance, education and industry.
INTRODUCTION
Multinationals today like Kraft Foods are continually being challenged for finding new methods for meeting and anticipating emerging consumer trends and demands, creating innovative quality goods & winning in a market of fierce competition. Kraft Foods’ also made higher investments for their R&D units; their employees and their work methods have resulted in new products which better seize and fulfill the emerging consumer demands and trends (Foodstuffsa, 2012).
Innovation is now becoming a subject of acute importance due to 3 main reasons: a) standard of living is enhanced, b) considered the largest growth contributor for the firms; c) contributes towards wealth of the nations. Kraft Foods in 2011 invested almost $20mn in its Saclay, (France) R&D Center for its European Biscuits. Saclay provisions product development of Europe’s many beloved brands of biscuits, such as LU, belVita, Prince, Oreo, Mikado, TUC and Saiwa (www.kraftfoodscompany.com, 2012). Employees played a vital role to boost the popularity of the products of Kraft Foods’ by customizing the recipes that suit local people tastes, and improve nutritional value.
The team at France created Mikado-King Choco, which is a more delicious as well as indulging recipe of the famous Mikado biscuits. They have also enhanced nutritional profiles of number of their food products, decreasing saturated fat content in Oreo by twenty percent, in Prince by thirty percent, and in TUC by forty percent, and also decreasing the sodium component by twenty percent in Oreo, while enhancing whole grain ingredient by 33% in belVita (www.kraftfoodscompany.com, 2012).
NIS (National Innovation System)
Patel & Pavitt (1994) have defined NIS as national institutions, its incentive structures as well as its competencies which determine rate as well as the direction of the technological learning in a particular country.
The NIS (National Innovation System) concept has arisen over the last 30 years in response to recognizing innovation inside a national economy is not possible to understand as simply an input-output process. Traditional innovation measurements in a country focus on inputs like expenses incurred on R&D or on the basis of number of employed research scientists. With outputs according to OECD (2001) being things like count of patents created. According to Trott (2007) a vital NIS aspect is the government’s role in setting up a national policy which could enrich the generation as well as commercialize innovation. NIS of France progressively developed from an excess centralized & planning stage, to an increased decentralized as well as flexible system, aiming towards internal synergies. The political changes that occurred after the Second World War gradually shaped the French NIS.
BUSINESS ENVIRONMENT OF FRANCE
In France there foreign investments don’t have any administrative restrictions. Investors are able to put in place a temporary or a permanent structure with no legal hassles; and then can freely carry their project onwards in an inexpensive and uncomplicated environment (Investinfrance.org, 2012).
Subject to the foreign firm’s necessities, several registration kinds are available. Registration is compulsory only when liaison office would be permanent and involves making third party legal relations, even if the involvement only involves carrying out the preparations. For greater comprehensive registration, MNC needs to verify that liaison workplace is present in France. Also, a French interpretation of the MNC’s articles should be provided to Business Formalities Center (Investinfrance.org, 2012).
France is considered an industrialized nation with employment regulations aimed to protect the employee’s interests as well as match the businesses economic priorities. France implementations of global mobility measures are designed to assist attract highly skilled workforce and facilitating intra-group staff mobility. Corporate tax system of France is designed for promoting business investment, development of regional areas and global expansion (Investinfrance.org, 2012).
France is among the major economic world powers. Agriculture and tourism are vital industries and also Paris is known for its luxurious goods. France is world’s most visited nation and generates the 3rd largest income from tourism. The Nuclear energy provides 75 percent of the total electricity produced (www.infoplease.com, 2005). Less than anticipated growth and increase in unemployment have resulted in government revenue decrease and increase in the borrowing costs, resulting in weakening of public finances of the country. France also applied austerity measures which removed tax credits as well as restricted maximum government spending so that it helps in bringing the budget deficit to below 3% ceiling of the euro-zone before 2013.
Statistics of France (www.indexmundi.com, 2012) (2011 est.):
GDP (Gross domestic product) (purchasing power parity): 2.214 trillion Dollars
Population below the poverty line: 6.2 percent (2004 est.)
Public debt: 85.5% of the GDP
Inflation rate (consumer prices): 2%
Labor force: 29.6mn
FDI; net inflows (Percentage of GDP) — France
Source: http://www.tradingeconomics.com/france/
The FDI; net inflows (% of GDP) in France, as per World Bank report of 2012 was 1.55 in 2011 (c.f. www.tradingeconomics.com, 2012a).
FDI; net inflows (Balance-of-Payment; $) — France
Source: http://www.tradingeconomics.com/france/
The FDI; net inflows (BoP; US dollar) in France as per World Bank report of 2012 was 42879669920.35 in 2011 (c.f. www.tradingeconomics.com, 2012b).
Economy of France neither increased nor decreased on a quarter to quarter basis during three months period to June. Private consumption besides imports had a negative effect on GDP, whereas fixed investment, government spending and exports contributed towards GDP growth (Moody’s Analytics, 2012).
Source: http://www.economy.com/, 2012
Unemployment rate: 9.3% (2011 est.)
Source: http://www.economy.com/, 2012
GOVERNMENT COMPONENT OF THE NIS
The Ministry of Higher Education & Research has the responsibility of coordinating research at government level. Conventionally, French innovation and technology depended on targets set by central state, implemented and performed in the Grands Programmes framework (Muller, et al., 2009). Large companies are the main industrial actors. Though, this common pattern has been changing, and over the last couple of years, the innovation efforts are increasingly being seen by SMEs. Today technology transfer is focused on validating and transferring research results which were generated in public scientific and technological research organizations, universities, and public industrial & commercial research organizations. Creation of ANR (Agence Nationale de la Recherche) in 2005 is considered the first main change which had an effect on the institutional innovation system of France (Muller et al., 2009).
ANR was founded with the aim of allocating financial aid for the research projects, and has the responsibility of supporting the basic & applied research studies. The ANR’s goal is stimulating the emergence & performance of a research. As both private and public laboratories are allowed to apply for research funding, it could strengthen the public-private partnerships of the research landscape in France. The merger of ANVAR, an innovation agency with BDPME, SME development bank formed OSEO group in 2005. OSEO’s mission is providing assistance as well as financial support for SMEs in their crucial developmental stages such as start-up, development, innovation and the buy-out phases. OSEO innovation is responsible for innovation support along with funding for technology transfer as well as innovative technology-based assignments, thus at the same time improving SME public support and simultaneously supporting innovative firms development (OSEO, 2012) . The Research Bill 2005 announced € 40mn for excellence centers in collaboration amongst public laboratories by partnership with the industry. As per French national reform program 2011-2014, €11.9bn has been allocated for R&D, €10bn for higher education and €13.1bn on Information & Communications for SME’s and the industry (French National Reform Program, 2011).
FINANCE COMPONENT OF THE NIS
Financial measures for supporting innovation include CIR, a tax incentive, introduced in 1983 by center for enhancing company’s competitiveness by R&D activities (Muller et al., 2009). It has no restriction to particular sectors or firms. CIR has been modified lately for better adapting to the SME needs and constituting a dependable element of innovating firms financing plan. General principle entails reducing company’s taxes in a proportion with their R&D work. To grant financial aid for creating research-intensive companies, besides bearing in mind the relatively feeble presence of the business angels for funding, the government has launched numerous measures to offer financial support at various stages of a firm’s development. In the start-up stage, innovating firms could be supported through private funds for finalizing their technology development. Since newer technologies usually originate from higher education facilities or research, these latter become partners of private funds. The advanced stages of a firm’s growth are financially protected by risk & development capital. Government funding is reimbursed with a maximum of 12 years. For increasing risk capital supply for innovative companies, France in 1998 formed a public fund to provide risk capital amounting € 137mn, divided between state which is responsible for the fund management, and European Investment Bank (Muller, et al., 2009). French government in 2000 decided to institute another fund for supplying risk capital, called FCPR, by capital worth € 150mn. For stimulating and facilitating creation of innovating firms, incubators are offering firm founders conditions that are favorable for starting business and interacting with small and new firms. Incubators which are promoted through Higher Education & Research Ministry deal with the innovating projects which have roots in a public research.
Regulating financial sector is another goal of government, besides mechanisms for helping businesses gets access to the funding (French National Reform Program, 2011). Recent financial crisis demonstrated the significance of a stable financing in the economy. Stability is important if businesses have to get access to different funding sources on reasonable conditions and terms, thus helping the firms to grow.
EDUCATION COMPONENTS OF THE NIS
Lundvall, (2007) the NIS focus should not only be on greater technology, but also on technology application as well as innovation across industry sectors, focusing on inter-sectoral knowledge flow, and national education system’s role in supplying skilled labour. According to Trott (2007) a vital NIS aspect is the government’s role in setting up a national policy which could enrich the generation as well as commercialize innovation. Most innovations are generated in within scientific R&D centers or universities by publicly funded research. NIS concept according to Patel & Pavitt (1994) has brought about structurally altered view about how a government could stimulate country’s innovation performance. For instance, the government in France is acknowledged to play a vital role in its economy. This influence is seen by the statistic that there was 55% private funding for R&D which is increasing every year, but it still remains significantly lower compared to most developed countries, in which R&D’s private funding is about 60% to 70%. Motivated by the necessity of higher global competitive levels and French economy integration into the EU, the 1990’s witnessed the arrival of national debates on the French NIS condition. A key portion of the era was recognizing the need for reforming the system of higher education of France and the publicly financed community of scientific research. Slaughter & Rhoades (2004) argue that this debate was also being echoed in many EU nations. Many authors like Walsh & Le Roux (2004) and Larédo & Sachwald (2005) have focused their research on France’s NIS system with special attention given to regional competencies need, learning abilities as well as the knowledge potential towards interregional competition including innovation activity. A sequence of organizations aim to get together various actors at a regional level, like a)technical units; b)and regional CRITT along with CRT that provide scientific as well as technological services; c) the CNRT that get together private research centers & public research labs. Networks of (RDT) technological development that comprise of a network of institutional players like DRIRE, OSEO, chambers of commerce and DRRT, which aim at exchanging and also providing info which benefits small firms, including the lower innovation aware firms.
Investments for the Future, a government’s programme, have been a chief mission to drive research & innovation. According to French National Reform Program (2011) this programme, co-financed by State (€35bn) and by some public & private players, has been planned to enable project implementation which has tremendous potential for economy, with notable emphasis on public research, higher education, innovation and innovative sectors. Evolving a country’s innovative competences depends largely on technology transfer from the public-sector research towards businesses and by better understanding between private and public research bodies. Further, it is necessary for reinforcing knowledge triangle, that is, the communication between business, public research and education, to be able to provide impetus to private and public research development. Enhancing proficiency in the scientific and technical skills in the primary as well as secondary education would be essential requirement of attaining excellence in the higher education.
INDUSTRY COMPONENT OF THE NIS
Innovation has also been supported by a special attention on the high growth sectors. For instance, the ANR (national research agency) has to disburse nearly €1.35bn towards launching ambitious research programs in nanotechnology and biotechnologies, bioinformatics and agronomy (French National Reform Program, 2011). Especially, devoted technological platforms, for biology sector particularly, would contribute towards the research program emergence and helping in structure them. According to French National Reform Program (2011) €2.5bn of Investments for Future program has been assigned for innovative digital services, uses, and contents. Projects have already been launched like Nano e-applications, digitization of contents, cloud computing, and e-health services and network security.
In agriculture sector, numerous action plans aim to shift farming practices to more efficient resource usage. Écophyto 2018 plan targets a 50 percent reduction in phytopharmaceuticals usage over the next 10 years whereas the Agriculture biologique plan Targets 6 percent farmland usage for organic farming by 2012 end, and 20 percent by 2020 (French National Reform Program, 2011). A chain of policies supporting innovation is being followed aiming to consolidate French industry’s long-term competitiveness. A report on key technologies for the future (2015) identifies emerging and existing technologies whose distribution would have high strategic implications. The study aims to recognize the technologies which would provide France a competitive edge and attractiveness during the next five to ten years.
CONCLUSION
NIS is described as a subsystem of a national economy developed historically in which numerous institutions & organizations interact with besides influencing one another to carry out the innovative activities (Balzat and Hanusch, 2004). Kraft Foods has invested in R&D and opened a R&D center in Saclay, France which keeps innovating and improvising the products based on the local tastes and preferences. The French NIS has witnessed numerous modifications over the last sixty years moving from big, national projects towards relatively more diverse methodology focusing on regional innovation and smaller firms. Unlike the larger firms, SME’s have limitations on resources to invest in R&D. This kind of innovation embracing by the lesser high technological sectors would probably significantly impact the country economy’s overall productivity. In France there foreign investments don’t have any administrative restrictions. France is considered an industrialized nation with employment regulations aimed to protect the employee’s interests as well as match the businesses economic priorities. The French Ministry of Higher Education & Research has the responsibility of coordinating research at government level. ANR was founded in France with the aim of allocating financial aid for the research projects, and has the responsibility of supporting the basic & applied research studies. Investments for the Future, a government’s programme, have been a chief mission to drive research & innovation.
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