French industrial companies invest around 2 billion euros more each year in software than their European competitors, on average. The research tax credit and the importance of multinationals in the French economy partly explain this gap.

According to the study by the Fabrique de l'Industrie, 64% of investments by French industry are intangible and 36%, material.  In Germany, the proportion is reversed: 51% of investments are tangible and 49% intangible.

This is a question that economists regularly ask themselves: why do French companies invest so much, and particularly in so-called “intangible” assets (software, databases, R & D or intellectual property)? The French industry invests 25% of its added value against 19% for its German counterpart.

In a study, the Factory of Industry, a think tank close to employers, and the French Observatory of Economic Conjunctures (OFCE), relativize these figures which are explained in particular by differences in the accounts of the national statistical institutes of on both sides of the Rhine. In fact, French industrial companies are said to invest around € 2 billion more each year in software than their European counterparts on average.

Causes that remain in debate

It’s hard to say why the French invest more. Mathieu Plane, economist at OFCE, wonders if this is not a consequence of the research tax credit (CIR) which represents more than 6 billion euros per year and in which companies can integrate software investments. As the location of intangible assets is difficult, it could be tax optimization. Or a simple preference of manufacturers for intangible assets because of their cost reduced by the CIR.

Experts from the Factory of Industry, for their part, hypothesize that this difference stems from the importance of large groups in France, the latter often investing more heavily in IT than smaller companies. Intangible investment is even “Very concentrated among a handful of large investors” in industry and is weak in smaller companies or those with little international presence, according to the study.

A hyper-concentration of investments

Several observations remain: “The typical profile of a company that invests in intangibles is that of a company belonging to a group, exporter and importer, whose material investments are high”, according to the study’s authors. This is particularly true in three sectors: IT and electrical products, machinery and equipment, and transport equipment (automotive and aeronautics). Together, these sectors of activity account for 62% of the intangible investments of French industry while they represent a quarter of the added value of the industry.

So, “The hyper-concentration of intangible investment suggests that the transformation of the industrial fabric towards Industry 4.0 is still in its infancy and that the intangible investment effort must be extended to more companies”. It seems that French SMEs are lagging behind in this area.

No improvement in competitiveness

However, for the moment, this additional intangible investment is not translating into an improvement in French competitiveness. For Louis Gallois, the former CEO of Airbus, the reason is simple: “Between 2017 and 2019, production capacities in France were almost saturated, which did not prevent France from posting a trade deficit of nearly 60 billion euros each year. Our challenge is to attract productive investments from French and foreign companies ”, estimates the president of the Factory of the industry. According to the study by this think tank, two thirds of French industry investments are intangible and one third are material. In Germany, only half of the investments are intangible.