On July 14 in Paris, a detachment of 400 Indian soldiers proudly led the Bastille Day parade on the Champs-Elysées. The chief guest of honor was Indian Prime Minister Manmohan Singh. By inviting Singh and the Indian soldiers to participate in the Bastille Day march for the first time, French President Nicolas Sarkozy wanted to emphasize France's special relationship with India.
Sarkozy is keen to help India elevate its role on the international scene by endorsing its candidacy to become a permanent member of the U.N. Security Council. He has bullishly asserted the need for expanding the G8 to the G14 by inviting emerging powers like India to join the elite club, and giving them a greater role in setting the global economic and geopolitical agenda.
But hyperbole and symbolic gestures aside, facts prove that France still has a long way to go in engaging India as a strategic partner. Case in point: During his visit to India in 2008, Sarkozy signed deals worth only a few million dollars—compared with the €20 billion ($28 billion) he fetched for Corporate France during his earlier visit to China. Annual bilateral trade between India and France stands at a paltry $8 billion. In contrast, commerce between Germany and India is doubling in volume every few years, and could reach $27 billion in 2012.
Unsurprisingly, Sarkozy is keen to make up for lost time and inject fresh momentum into Indo-French trade. After all, France enjoys a longstanding relationship with India. In the midst of the 18th century, the French Empire was close to conquering the entire subcontinent when Governor Dupleix was called back to France by the Compagnie des Indes (which had established a trade presence in India well ahead of its British rival, the East India Company).
Where's the Knowledge Exchange?
The question now is whether France can effectively reconquer the fast-growing Indian market, which is expected to eclipse the French economy by 2020 and become the world's third-largest by 2035. I doubt it. Why? Because France's trade policies are stuck in a bygone industrial era dominated by the importing and exporting of physical goods, whereas the world is rapidly moving into the digital era characterized by seamless knowledge exchange via Google (GOOG), Wikipedia, and Facebook.
Need evidence of France's archaic trade policy? Just look at the nature of deals cut between Sarkozy and Singh on July 14, and others currently under negotiation. French nuclear giant Areva (CEPFI.PA) signed a deal to sell six nuclear reactors to India. French arms suppliers like Dassault Aviation (AVMD.PA) plan to sell dozens of submarines, helicopters, and fighter jets to the technology-hungry Indian military. It's as if we were transported back to the 18th century, with Sarkozy acting as a Compagnie des Indes captain trading French cannons for Indian spices.
France's transactional trading model (of primarily military/industrial goods) may be appropriate when dealing with China, the "world's factory," which operates under a centralized economy dominated by state-run firms. But this more traditional approach won't cut it for India, emerging as the "world's brain," with its millions of highly qualified scientists and engineers, a booming IT sector, and ambitious biotechnology and space exploration programs. India's entrepreneurial knowledge economy requires a different engagement model.
A New Cooperation Paradigm
How can France forge a strategic economic partnership with knowledge-rich India? By replacing its mercantilist, industrial-era approach with what Warren Buffet calls "true trade," or the exchange of ideas and talent. In essence, France must adopt a new cooperation paradigm that lets it effectively harness and integrate the innovation capabilities of partner nations like India. Such creative engagement hinges on building a new collaborative market structure made up of what I call "Indo-French Innovation Networks," or IFINs. These IFINs form a fluid and dynamic ecosystem linking the talent, ideas, and capital available in both France and India to satisfy local and international demand for innovation.
Instead of rigid commercial exchanges between "importers" and "exporters," IFINs would allow for much richer collaboration among four key actors: the inventors (research agencies and scientific universities); the transformers (sales and marketing powerhouses); the financiers (bankers and venture capital firms); and the brokers (trade agencies and sociocultural experts). In this model, the French firms that collaborate with their Indian counterparts will dynamically adopt—based on their corporate strategy and depending on the project—the role(s) of inventor, transformer, financier, or broker.
French firms must build out these IFINs quickly to catch up on Anglo-Saxon rivals who have been successfully operating such innovation networks in India for years. For instance, the IBM (IBM) Global Business Solutions Center in Bangalore is staffed with inventive MBAs and PhDs who concoct breakthrough business models (such as expanded microfinancing) that are later transformed for adoption in other IBM markets. Bangalore also is home to Cisco's (CSCO) Globalization Center East, which acts as the company's non-U.S. R&D headquarters. This center is now spawning whole new business units to serve India and other emerging markets. Riding on the back of such rich knowledge exchanges, "true trade" between the U.S. and India has skyrocketed from $9 billion in 1996 to $43 billion today.
Tap Into France's Indian Community
Fortunately, pioneering French companies like Capgemini (CAPP.PA) already have forged strong innovation links with their Indian operations. But much more remains to be done. After all, France scored abysmally low in a recent study by Forrester Research (FORR) of 26 Organisation for Economic Cooperation & Development nations on their ability to build transnational innovation networks. France's poor showing was due to its weak mastery of foreign languages, shortage of venture capital, and deep-seated adulation of basic R&D at the expense of its commercialization.
But France could reverse this trend—starting with India. To make IFINs operational, the French government should step up student and scientist exchanges with India. (France currently hosts fewer than 2,000 Indian students, compared with nearly 20,000 in Britain). France also must empower its regions and cities such as Grenoble (a hotbed of nanotechnology activity) to forge direct linkages with Indian inventors, transformers, brokers, and financiers. Finally, France must capitalize on the Indian community that already lives on its own soil—much as the U.S. and Britain have done via organizations like Silicon Valley's TiE (The Indus Entrepreneurs). This French minority group boasts 60,000 bilingual Franco-Indians who can act as sociocultural intermediaries to forge tight, knowledge-rich economic ties between the 65 million French and 1.15 billion Indians. The result could lift both countries.