Innovation Economics, Engineering and Management Handbook 1

Many tools have been implemented to attract innovators to the desired territories. For example, in France, two main types of support have been developed: direct support, in the form of subsidies or national programs, and indirect support, in the form of incentives (particularly tax incentives). In the 1990s, the R&D subsidy policy was oriented towards “Major Programs” dominated by large companies, towards research sectors such as aeronautics, aerospace, nuclear energy and NICTs, as well as, in a more original way, towards support for R&D networks using national or international tools. Gradually, indirect R&D support has taken precedence over direct intervention. They include all those that do not give rise to direct payments to firms from public bodies, but which modify their environment and investment opportunities (Lhuillery et al . 2003). In France, the Crédit d’impôt recherche (CIR – Research Tax Credit) is the major innovation support mechanism (Liu 2013). It is an incentive measure allowing a tax reduction calculated on the basis of R&D expenses incurred by companies. With its last major reform, in 2008, this measure, which is very popular with businesses, became the main tax expenditure of the Ministry of Higher Education, Research and Innovation with a cost of 6.2 billion euros for 2019 (Sénat 2019).

The French system seems to be a judicious one (France Stratégie 2016) and other countries have also followed this path. Canada, for example, proposes a fairly similar program through the SR&ED (Scientific Research and Experimental Development) tax credit. It is a federal tax incentive program designed to encourage Canadian companies to carry out R&D in this country. It is the same with the United Kingdom and its “R&D tax relief”. Spain also uses similar designations: its R&D and Innovation Tax Credit, with the parallel implementation of national and international subsidies for R&D, reductions in social security contributions for R&D personnel or patent boxes for reduced costs related to intellectual property, also applied in the United Kingdom.

Overall, tax credit is strictly controlled within the European Union and there is a risk of a race for tax optimization, particularly with regard to the transfer of intellectual property rights in low-tax countries (OECD 2010). But in the end, it is still difficult to assess the effectiveness of this support, which may, depending on the case, result in total substitution or significant knock-on effects, by way of a whole range of intermediate effects. Public funding is necessary. However, care must be taken with regard to the institutional and regulatory details of the allocation of this support (Kessler 2008). To this end, the interest is not in enabling firms to reach out to the state for tax credits or subsidies, but rather in creating an overall environment that is conducive to innovation through the development of innovative firms, in the current context of the entrepreneurial society.

The recognition of the role played by innovation in economic growth has led to the proliferation of academic work and public policy tools on how to stimulate, generate, disseminate and measure innovation at the level of individuals (entrepreneurs, employees, managers, researchers, workers) and of collectives, as well as of the organizations and institutions that support them. Initially considered as the engine of innovation, the role of the entrepreneur was reduced during the years of strong growth, to the benefit of large companies, and has come back to the forefront since the end of the 20th century, but taking place in the meanders of the network company. Innovation systems are evolving. They are being configured and revisited from the structuring of an international scale to a more local scale. They are also sustainable, inclusive and able to play an active role in economic development. Innovation is, by definition, where it is not expected, in new paths and trajectories.

Economists have very quickly turned their attention to the double face of innovation, the one that initiates, generates and the one – the same one – that destroys. In both cases, the management of innovation and progress seemed to be in the hands of our societies, holding real power but marked by flagrant asymmetries. Controlling progress for (endogenous) growth requires substantial public investment to solidify the education, transport and health infrastructures that will be the basis of future growth. Yet public investment is often the first to be reduced as a result of austerity policies. The fragility of industrial society sometimes shatters, and the efforts made to control evolution and transform the pitfalls into progress seem to be reduced to nothing. Perhaps then, it is the definition of progress that is an issue, based for decades less on improving the living conditions of the greatest number of people than on the quest for short-term profit. Innovation, but to what end? Economists’ thinking should certainly be oriented towards this path, to better master the future.

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