In the early 1990s, Michael Porter’s The Competitive Advantage of Nations and Nobel laureate Paul Krugman’s Geography and Trade increased the awareness of the importance of geographical economics and how interactions between complementary businesses can lead to innovation and growth. The notion of economic clustering was born.
The idea has gained increasing traction ever since, with governments and industry organizations around the world developing business clusters to foster innovation and economic growth.
France for its part launched a national policy to develop clusters in 2004, certifying 67 of them by the following year, with 71 in existence to date. The goal was to encourage cooperation between companies, public research labs and academia to develop innovative business activity and R&D in the clusters. Over the long term not only did the policy aim to enhance the competitiveness of businesses, it also sought to enhance the attractiveness of certain regions.
As part of this policy, France allocated €1.5 billion from 2009-12 to finance research partnerships in the context of clusters. This initiative was in line with a fund the government started in 2005 (Fonds unique interministériel [FUI], or Interministerial Fund) to finance R&D projects bringing together a minimum of two companies, a public or private laboratory, an institution of higher learning or an organization specialized in transferring technology.
A third phase began in 2013 for a period of six years to transform the resulting R&D projects into ultimately new services and products.
Prior to France Stratégie’s assessment of the clusters, no study had been able to demonstrate that a company belonging to an officially recognized cluster was able to use government financing to spur their R&D during the first two phases of the programme.
A significant impact on R&D
Ben Hassine and Mathieu looked at data from individual companies from 2006 to 2012, a longer period than had been studied previously. They used econometrics to reproduce a real-world experience, controlling for selection bias.
As mentioned, they found a clear and substantial impact on total R&D spending by 2007 and self-financed R&D by 2009. For every euro in government funding received, each company has been able to generate three euros in R&D spending, close to two euros of which is self-financed. Small and medium-sized enterprises (SMEs) enjoyed a clear boost, whereas the effect was less pronounced on larger companies. But arguable more importantly, the effectiveness of the programme has been on the rise since 2009, which is important as it represents a departure from past trends and what has been observed in other countries with similar programmes.
What’s more, Ben Hassine and Mathieu found that between 2005 and 2012 companies in the clusters hired 27.5% more R&D employees on average when compared to regular businesses. That said, belonging to a cluster in 2012 was not found to enhance performance downstream from R&D, be it with respect to sales, the number of patents, exports, total staff or value added.