Oséo plays a pivotal role in public policy regarding credit and credit guarantees. With €569 million in aid for innovation in 2011, Oséo is also a major provider of support for innovation. Thanks to its broad scope for action, it is able to support companies throughout their development. For example, Oséo can offer companies aid for innovation programmes in order to develop a new product or for scaling a product up for industrial production, as well as loan guarantees. This study focuses on aid for innovation.

As a bank held by the State and public institutions, Oséo exists to remedy market imperfections in the provision of funding to companies. When the returns are highly uncertain or the investment lead time is long-as is particularly the case with innovative projects-entrepreneurs naturally have difficulty financing their projects, desirable as these may be for society in general, over and beyond considerations of private profitability for the company itself. Oséo provides repayable advances to these firms, combining funding with partial coverage of the risk involved.

Oséo functions within France's wider system of innovation support mechanisms, including in particular the research tax credit (Crédit d'impôt recherche). All firms engaging in R&D qualify for the latter, whose justification lies in the positive externalities generated by the dissemination of knowledge that comes with R&D, benefitting society at large.

Oséo grants funding for innovation after scrutinizing each project individually. This study finds that Oséo selects projects effectively: for a given amount of R&D spending, projects receiving 33% of their funding from Oséo generate three times more patents than projects not supported by Oséo.

According to a study by Nicolas Serrano-Velarde (2009), it emerges that funding provided by Oséo has an impact on R&D spending by small and medium-sized businesses (SMEs). €1 of funding in the form of a repayable advance is reckoned to generate a €1 increase in R&D spending by SMEs. On the other hand, the risk of a windfall profit is greater among larger companies.

As a result, Oséo appears to provide effective support for innovation. As far as possible, it ought to continue to target small and medium-size forms and promising projects that would otherwise not have seen light of day for lack of finance.

Trésor-Economics No. 102