Country Close-Ups

France


In an unhelpful economic context, local pro-entrepreneur policies acquire growing importance. As Nadine Levratto, CNRS Research Fellow, points out: “French cities seem to have taken this necessity on board, as reflected by the overall improvement in entrepreneurs' own assessment of provision. The improvement is substantial, with the overall 2008 score rising more than 10 points year-on-year”. Every participating city improves its position. The biggest jump is recorded by Marseille; the smallest, by Lyon. Paris and Lille are between the two.

1. Stable showing overall and across all ranking themes
The hierarchy is stable. Lille, Lyon, Marseille, Paris is the descending order for all criteria except environment, which sees the top two change places. This exception should doubtless be attributed to Lyon's cultural and environmental quality, which Lille has not managed to overtake with its European Capital of Culture operation.

    • Lille's dynamic: the city's efforts to nurture business creation illustrate the importance of the resources the municipality devotes to what is now viewed as its best growth engine. With more than 20 startup funding and support bodies, Lille figures among the most dynamic metropolitan areas in terms of business creation. Every stage of the process is covered; and the municipality and local Chamber of Commerce and Industry stress business creation as a necessary complement to the major groups that underpin the local economy (3 Suisses, Arc International, Auchan and Bonduelle, as well as Castorama, Cofidis, Dalkia, Decathlon, Finaref, Groupe Vauban, La Mondiale,
La Redoute, Leroy Merlin, Renault, etc.).
    • Lyon's strategy is very similar to that of Greater Lille. Entrepreneurship is a priority for the Lyon area's economic development - driving social integration and job creation. It makes a strong contribution to regenerating the economic fabric. The “Lyon, City of Entrepreneurship” programme reflects this priority. And with 11,800 startups including 2,000 acquisitions in 2007 (a 23% increase over five
years, compared to 13% growth across France's other nine largest cities), Lyon can claim to be one of the country's leading entrepreneurial centres.
    • Marseille's third place is a constant across all themes of the ranking, with the city earning its best score for entrepreneurship promotion. However, entrepreneurs' satisfaction is much lower for the other themes, including the environment. This is highly surprising, given its efforts to enhance its residents' setting; transport, its big flaw, perhaps explains this weak showing. Nadine Levratto notes:“Marseille's third place is in a sense confirmed by the trouble one has in finding a website dedicated to the question by entering the words “création, entreprises, Marseille” in a well-known search engine. The difference with the previous two cities is clear”. Whereas for Lille and Lyon, one of the first listed websites is for the metropolitan area's or CCI's business services, Marseille offers no such facility. This leading southern French city therefore has substantial room for improvement with regard to information and actual provision.

2. The gap between the capital and the major provincial cities is the second key point requiring emphasis.
The Paris region (Ile-de-France) comes fourth among French cities. Across the world, “capital regions” are driving national economies and serving as centres of innovation and competitiveness. Paris and the inner band of its surrounding territories (Paris, Hauts-de-Seine, Seine-Saint-Denis and Val-de-Marne) add up to more than 300,000 enterprises, or 20% of French GDP. The Paris Chamber of Commerce
and Industry reckons the city hosts 40% of French R&D and senior jobs in the Ile-de-France region. Also concentrated there is 33% of the high-technology sector in terms of jobs and sites; 38% of the registered offices of companies based in France; and 47% of executive staff. Ile-de-France therefore has weighty potential at the national level - and also at European level, because the region represents 8% of European R&D spending in both the public and private sectors. At 3.2% of GDP, the intensity of R&D in Ile-de-France is higher than the Lisbon target (3%), and the region publishes 7.2% of Europe's research papers (putting it second behind London).

Given the pre-eminent status granted to innovation, it is perhaps normal for more routine activities to be less well addressed by local authorities, which would explain the relative dissatisfaction of the surveyed entrepreneurs. In 2007, 75,300 new businesses were registered in Ile-de-France - the highest level observed in the period 1994-2007. Of the 306,500 companies set up nationwide, a quarter are in Ile-de-France. With 12% of registrations nationally, the Provence-Alpes-Côte d’Azur region comes second, ahead of Rhône-Alpes (11%). These three regions host half of France's new businesses. Several phenomena may contribute to Ile-de-France's less dynamic performance. Though first for creations, the region ranks bottom in terms of growth. Now that the annual number of startups has reached a very high level, Ile-de-France has one of the largest proportions of young companies in the regional economic fabric. As a result, startups would appear to be finding it increasingly tough to penetrate markets where supply is already high or where demand is slipping - thus contributing to the slowing rate of business creation. Conversely, some provincial regions enjoying high dynamism would appear to be in a catch-up scenario. A portion of new businesses rely on the residential sector, and these are boosting regions undergoing strong population growth, such as the Atlantic coast and southern France.

3. Overall, business creations seem to be one of the main components of public policies geared to territorial growth
Generally speaking, many measures are designed to support small businesses’ aim to maintain, modernise and develop their activity. Schemes to help create and perpetuate small businesses are the instrument most commonly used by the authorities. Yet drawing up an inventory of the network, and of very small enterprises, is not easy. The Conseil National de la Création d’Entreprises estimates there are roughly 3,000 agencies which, in one way or another, support business creation; and well over 100 that handle aid for companies!

As Nadine Levratto points out: “This abundance raises questions. It may help cater for the huge variety of creator profiles, but it remains an inextricable labyrinth - indeed, guides have had to be published to try and sort the seriously effective operations from what look more like vehicles for communications strategies. In a field where more doesn't necessarily mean better, the main mission of local authorities with a entrepreneurship focus is also - and especially - to make the many types of provision for creators easier to understand. If French cities want to improve their rankings, rationalisation is a prerequisite.”


Italy




Italian entrepreneurs faced with the crisis. The importance of intangibles
Turin, a new entry to the ECER-Banque Populaire Ranking, leads the Italian field ahead of Naples, Milan and Rome, although their scores are very similar. However, all the Italian cities are at the tail end of the ranking, well behind those in Northern Europe.

1. A country with strong regional disparities
There is a strong disparity in living standards between Italy's regions. Il Sole 24 Ore's annual report on living standards puts the country's northern regions (Trentino Alto Adige, Aosta Valley) first on 36 criteria (income, occupation rates, birth rate, health, etc.) with Campania, Apulia, Sicily and Calabria coming bottom.

The northern regions, especially Lombardy and Emilia-Romagna, have one of the highest GDPper-capita levels in the European Union, comparable to those of Île-de-France or Greater London. In contrast, the southern regions are still off the economic pace compared to their northern counterparts. The country's official unemployment rate is 5.6% but varies between regions, and especially between north (3%) and south (15%).

2. An inefficient administration
The Italian administration is viewed as inefficient by entrepreneurs. According to a local study, for example, the Italian score is 83/100, behind the United Kingdom (103) and Germany (97). The World Bank reckons that setting up a business in Italy is particularly difficult: the 2009 indicators in Doing Business rank Italy 65th out of 181 countries worldwide, a 6% fall year-on-year (from 59th in 2008). And for ease of business creation, Italy ranked 53rd. Besides complex and costly red tape, Italian companies are penalised by taxation: 76% of earnings in total, against an OECD average of 46.2%. On this criterion, Italy ranks 128th globally! Naples' place in the ECER-Banque Populaire Ranking is slightly higher than Rome's and, especially, Milan's. This may reflect a different perception of regulations, and also the existence of a whole repertoire of tax incentives and schemes for the disadvantaged regions of southern Italy.

3. A government that takes concrete measures to help SMEs
The - slightly more - positive perception among Napolitan business creators has perhaps also been stimulated by the stance of the new national government, which has sent important signals of recognition to the city - for example, holding its first cabinet meetings there. Administrative reform is one of the priorities of the new minister Renato Brunetta, who is embarking on the modernisation project “thinking not only of the country as a whole (…) but also, with the current weakness in the competitiveness of the economic system, (…) of the characteristics of Italy's private-sector companies - small, family-owned and export-led”.

4. Entrepreneurs optimistic in the face of the crisis
Italy has a long tradition of entrepreneurial dynamism, particularly thanks to its dense network of SMEs - subcontractors and small/micro enterprises. In parallel is an underground economy, especially common in the south. One of the rare Italian economic indicators not to fall in recent months is business confidence in the future.

Despite a fairly worrying context, the number of businesses in Milan rose by 1.8% in 2008, a rate above the national average. And Milanese entrepreneurs say “No to doom and gloom”. For two-thirds of the Italian entrepreneurs (63.3%) surveyed by the Milan Chamber of Commerce in November 2008, the current crisis is viewed as a “normal slowdown phase in the economic cycle”. The crisis will have repercussions, for sure, but they are still confident - especially in the banking sector, which 64.7% of respondents deemed more solid than those in America and the rest of Europe.

5. The importance of intangibles
In the global GDP chart Italy ranks seventh, yet is only 46 by the World Economic Forum for overall competitiveness, behind France (18), Chile (26) and Latvia (23)! Could this be an “accounting evaluation”, different from immaterial value and the capacity to generate value in the future? This value depends on intangible resources and competencies (quality of training, education and research; ability to adapt quickly to change; quality of public order, of the environment, of the judicial and political systems). These values are harder to measure, and struggle to feature in the country's many contradictory rankings.

In conclusion, the current crisis may even have positive consequences if it speeds the process of change by giving finance a reality check and stimulating evolution and adaptation.