German business outpaces France in innovation

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Germany is steaming ahead of traditional leaders France in research and development, says a new study by the French economy and finance ministry. euractiv.fr reports.

In 1996, French companies pumped 1.69% of their added value into research and development projects, against 1.65% for their German counterparts, according to the study, published this month, EURACTIV France reports.

Since the days of the franc and German mark, the trend has reversed, with German businesses investing 2.11% of  their added value in 2008 compared to just 1.47% in France – below the average of the other countries included in the study, amongst them South Korea, Spain, the US, Norway, and Japan.

France’s ‘detrimental sector position’

The study, published this July by France’s Competitiveness, Industry and Services directorate general (DGCIS), which is a part of the economy and finance ministry, says these figures do not tell the whole story.

The study says the percentages favour countries with high levels of specialisation in sectors which naturally contribute to innovation.

While France’s overall investment level has dropped, French businesses pump billions of euros into numerous strategic sectors. In information technology and communication, transport and electric machinery, they invest an even larger percentage of their added value than the Germans.

The problem is that this financial spur is not enough to offset France’s low share in key innovation sectors, which represent only 4.5% of French GDP, compared to 10% across the Rhine.

“France suffers from a sectorial position in its economy which is detrimental to its global intensity in research and development,” the study says, also suggesting there is even a “disengagement of industry” in the country’s economy, which favours services.

In France, industry only accounts for an estimated 18.8% of GDP, compared to 28.6% Germany.

Germany’s medium-sized businesses boom

Business structure also explains in part the gap between the two countries.

More French companies invest in innovation than in Germany, DGCIS figures for 2006 counting 250,000 compared to Germany’s 200,000. But in 2006 that smaller number of German businesses invested €36 billion compared to €14 billion for the larger, French cohort.

But Germany has far more medium-sized businesses operating in research and development, which benefit from better market access than small companies. Businesses with 1000 employees or more account for 82% of the sector in Germany, the study says, compared to just 73% in France.

Innovation has taken centre stage in EU policymaking, with Brussels placing research, education and the Innovation Union flagship at the heart of the 'Europe 2020' plan for growth and job creation.

New sources of finance were at the heart of the EU's innovation strategy, published in October 2010 by the Commission.

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