Written by Scott Scheper for Gaebler Ventures
French entrepreneurs? Entrepreneurs in France are a scarce commodity. We look at why France is less entrepreneurial than many of its peer countries.
France stands out among those countries in which entrepreneurship is low.
President George Bush was quoted as saying "The problem with the French is that they don't have a word for entrepreneur."
In fact, he never said that, but the surprising truth is that French entrepreneurs are indeed a rarity.
The number of people engaged independently in an enterprise in France was just over 2 million at the end of the 1990s.
On a per capita basis, this is very low as compared with other countries.
Italy, the United Kingdom, the Netherlands and the United States are a few countries in which entrepreneurial activity is much higher.
There are various reasons that may contribute towards this situation of low entrepreneurship levels in France.
For starters, there is a lack of entrepreneurial spirit among the French mainly because the population depends largely on salaried jobs.
Moreover, the average entrepreneur in France is pulled down because of social premiums, financial risks, dearth of capital, and market fluctuations. The only factor pushing the entrepreneurial spirit is the prospect of self-fulfillment.
Background on French Entrepreneurship
Most OECD (entrepreneurship activity) countries show a U-shaped pattern in development of entrepreneurship.
Entrepreneurship activities in these countries experienced rapid growth after the mid-1980s.
France was a notable exception to this trend. The three decades of the 1970s, 1980s and 1990s saw an unsteady decline in entrepreneurship in France.
There was some stability and a slight increase in entrepreneurship between 1984 and 1992, yet there was a decrease in entrepreneurial activity after that period.
The history of entrepreneurship in France before the 1970s was largely positive. This primarily resulted from the French government's introduction in 1958 of monetary and financial reforms that encouraged exports.
Moreover, in early 1960s repatriates coming from North Africa led to an increase in population which resulted in an increase in demand for consumer products. A positive trend is expected in near future since similar demographic changes are underway.
The French People
The culture of France is such that people have a predisposition towards salaried jobs.
Various factors have affected the entrepreneurial spirit of French people over decades. The population increase in France follows a positive trend. The increase in population is directly related with increase in self-employment, though there is a considerable time period that has to be considered to see any effect of the increase on entrepreneurship.
Moreover, people between the age of 25 and 40 are more likely to be entrepreneurs than older or younger people. The French population comprises a high percentage of people who are under 20 years old, as compared with other countries. Similarly, there is a larger proportion of people older than 60 years. Age structure and population have not had any great influence on improving entrepreneurship in France.
Interestingly, there is a positive trend in the number of female entrepreneurs. However, the data suggests that women prefer salaried jobs. There are more male entrepreneurs in France and the average turnover of women-owned enterprises is lesser than that of male-owned enterprises. The same holds true for survival rates of men and women owned enterprises as well.
Furthermore, there is a high rate of immigration in France. Immigrants bring along with them an entrepreneurial spirit for survival. They also lead to unemployment which has a negative impact on entrepreneurship. On the whole, many experts believe that immigration has led to a negative influence on entrepreneurship in France.
The French Government
Government policies in France concentrate on promotion of venture capital, promotion of state incubators and promotion of innovative startups. However, there is a high tax rate, the regulations are strict and there is discrepancy in tax burden on self-employed people and the remaining lot. Until the early 1990s the taxes were very high on SMEs, especially payroll taxes, family allowance contributions and unemployment benefits.
By the end of 1990s the French tax system started seeing drastic reforms. There was a reduction on social security contributions on low wages, tax on fixed assets and the annual payroll, transfer taxes on businesses and goodwill, inheritance taxes, tax constraints on business ownership etc. In addition, several measures to simplify the taxation system have been introduced. These include harmonization of filing deadlines for different tax forms, increased flexibility for switching from one tax regime to another etc.
There is more concentration on technology based businesses and services; this gives a back seat to small and mid sized start-ups. The French government is presently concentrating on creating employment opportunities and economic growth by encouraging SMEs.
Starting a new enterprise in France is a lengthy process and requires a lot of investment. Nonetheless, these regulations are necessary for future security.
Moreover, banks and venture capitalists were unwilling to support start-ups for a long time in France. Hence, the SME Development Bank (BDPME) was established in 1996 by the French government. The bank operates in collaboration with other banks and assists SMEs.
The Future for French Entrepreneurs
Foreign investments are increasing in France. There are other specific policies introduced by the French government to increase entrepreneurial activity. Education is also encouraged by the French government for its relation with entrepreneurship. It is viewed as a tool to assist self-employment.
Though France is not known for entrepreneurship, the efforts of the government in encouraging self-employment will likely pay off in the near future.
The introduction of new policies and the changes made in the existing ones may contribute measurable difference in entrepreneurship in France over a period of years.
Scott Scheper is a venture finance enthusiast and serial entrepreneur hailing from Orange County, CA. Scott recently graduated from Chapman University where he was a Cheverton Fellow and graduated with honors in Finance, Management and Marketing.
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