If there is a French Silicon Valley, it is probably located around this bustling university town nestled against the Alps.
It was here that French scientists first figured out how to turn rushing mountain water into electricity and where the French government has its prestigious atomic energy laboratory, the CEA. The region's chemical industry begat what was once a world-beating pharmaceutical industry. And with so much brainpower concentrated in one place, ST Microelectronics, Philips and Motorola (now Freescale) chose nearby Crolles as the site for a new R&D facility, where an international team of 1,200 now works to push back the frontiers of chipmaking technology.
To visit the complex at Crolles is to step out of the world of striking unions, 35-hour workweeks and burdensome social taxes. The business culture is decidedly global, the prevailing language technology, the competitive energy palpable. Crolles enjoys close relations with the local universities and the CEA. There's a performance-based compensation system and the project director is even considering whether to back a start-up by one of his researchers.
In short, Grenoble looks to have many of the elements of a growing and thriving high-tech cluster. But it is still a distinctively French variation, and not one likely to be easily transplanted to the rest of the country.
One of the hallmarks of the French tech sector is that it is strong where government plays a big role, as either the customer or former owner -- think of civil engineering, power generation, telecommunications, public transit and defense. It does much less well in tech neighborhoods where pleasing consumers is critical.
Scratch the surface of a high-tech company here and you're also likely to find government money involved. The Crolles project, for example, received direct grants from the French government and the European Union. And it will surely be the indirect beneficiary of a new research lab at CEA dedicated to microtechnology and nanotechnology.
One reason for all the government support is that private risk capital was so hard to find. In the high-tech boom of the late '90s, France extended tax breaks to investments in start-ups and a new Nasdaq-like stock market offered early investors a way to cash out. But the bubble burst, the new stock market fizzled and much of the local money dried up. Although there remains plenty of private financing, much of it comes from big corporations or from U.S.- and Britain-based venture capital and private equity firms.
"I'm sorry to say, we just don't have the depth of financial markets you need to support an industry like biotech," said Frederic Turner, general manager of Genzyme's French subsidiary. As a result, promising companies in need of capital often choose to sell out to larger companies such as Genzyme, which now sells a French-made drug that helps the human body accept transplanted hearts and other organs.
This reliance on big government and big companies to drive innovation is deeply ingrained in the European business model. "The culture of thinking in terms of big companies is finally changing, but only very slowly," said Bruno Rousset, who heads a thriving insurance group in nearby Lyon and runs a small venture capital fund on the side. "In terms of entrepreneurship, I would say a generation will have to pass. It is not obvious to a French person to take such risks in life."
It's also not easy. Francois Turcas, president of the small-business association in Lyon, points out that the first step in starting a business in France is to pay a tax, even before you have your first customer. And the fact that unfriendly labor laws kick in when a firm has more than nine employees, he said, creates a real disincentive for growth.
It is also hard to imagine that French workers would be lured to small high-tech firms by the prospect of receiving stock-option grants. One business owner in Lyon told me how he tried to introduce profit-sharing to his French workers. During the first couple of years, the company met its targets and set aside 10 percent of the profits for its employees. But when he announced in the third year that there would be no profit-sharing because the company fell short of his targets, workers struck and the program was eventually abandoned. Imagine how they'd feel about stock options.
More than anything, however, it is the cultural bias that presents the greatest hurdle to entrepreneurship in France, Italy or Germany. I found it interesting that in all three countries, university students couldn't come up with an answer when I asked who was the Bill Gates of their country. And polls of university students invariably show government service to be the most popular career goal, followed by employment at big companies and investment banks. Maybe one reason so few of them dream about starting a business is that they know that those who do so and fail carry a social and financial stigma around with them for the rest of their lives.
It is possible, of course, that Europe might follow Japan's lead and try to create a robust high-tech sector without the entrepreneurial culture of Britain or the United States. But it is worth noting not only that Europe failed to translate its longtime strength in pharmaceuticals into a lead in biotech, but that much of its traditional drug research has been shifted offshore.
Europe has many great universities, lots of smart people, vast wealth and a wonderful lifestyle that can attract talent from around the world. But without a risk-taking culture, it's not obvious that high-tech will be the solution to its economic crisis.
Steven Pearlstein can be reached at email@example.com.