What Does France Have Against Amazon?
France has had enough of Amazon.com and decided to do something about it.
The country's lawmakers signed a bill last Thursday that will prevent the online retail behemoth from combining free book deliveries with discounts of up to 5% -- the ceiling on book discounts set by the French government in 1981.
The bill was approved unanimously, and it was the outcome of an anti-Amazon sentiment that's sweeping through the country. A couple of months ago in a speech to booksellers in Bordeaux, culture minister Aurélie Filippetti blasted the company for its disruptive policies. "Amazon, through dumping practices, smashes prices to penetrate markets only to raise prices again, once they are in a situation of quasi-monopoly," she said.
While her outburst was, more or less, understandable, I can't help but wonder what's worse: allowing a quasi-monopoly to emerge or supporting outdated businesses like traditional bookstores? More importantly, is protectionism the answer for not being competitive and creative enough?
Regulate your way back to innovation
France is fed up with Amazon not just because it considers the online retailer as the "destroyer of books," but also because Amazon has been dodging taxes by exploiting loopholes in the European states' tax regimes. It reports most of its European sales through a Luxembourg-based holding company, cashing in on this state's comparably low corporate taxes for earnings outside its borders.
The French government is pushing for the European Commission, the bloc's executive body, to revamp tax rules for digital companies, ensuring profits they make on the continent are subject to taxation. However, that's not all there is to it.
The Wall Street Journal, citing French briefing documents ahead of an EU summit later this month, notes that France also wants the EU to regulate a small number of platforms for Internet and digital applications. Amazon, Google, Facebook, and Apple are in the crosshairs.
"The current situation makes it difficult for European champions to emerge at a global scale," French digital economy minister Fleur Pellerin said in a recent interview. "Europe needed new regulatory powers to intervene much earlier, to level the playing field in the Internet economy and allow the emergence of alternatives in Europe to U.S. Web giants."
Apparently, France seeks to tackle U.S. Internet juggernauts' global dominance by setting more aggressive rules. But can you really regulate or even tax your way back to achieving a competitive advantage? What happened to dazzling the public with leading-edge products and innovative solutions?
Not enough conformists?
For the four-year period between 2008 to 2012, the Innovation Union Scoreboard -- the barometer that gauges the bloc's innovation performance -- showed an annual average growth rate of 1.6%. However, the bloc had a hard time keeping pace with major innovation leaders, including the U.S.
Source: European Commission, Innovation Union Scoreboard 2013
So, it's not that Europeans are not creative, it's just that, as a whole, they don't perform as effectively as the U.S. Why is there this gap in innovation capacity?
An article published in the Harvard Business Review recently really got me thinking. Ella Miron-Spektor, the author and organizational psychology expert, suggests that conformists are a key to unlocking creativity and delivering innovation. "If you have the right proportion of conformists on an innovation team, they can dramatically increase its output of radical innovations," she mentions.
In general, conformists are useless when it comes to generating breakthrough ideas. Even so, as Miron-Spektor says, because they adhere to the rules, get along with others, and know how the system works, they can assist in turning those ideas into workable products.
Assuming that, in our case, the clusters of researchers, academics, entrepreneurs, and investors represent the conformists -- in other words, the people that can translate ideas into profitable ventures -- then, Europe definitely needs more of those.
According to the Scoreboard's individual performance indicators, innovation in Europe was mostly driven by license and patent revenue from abroad, community trademarks, as well as research systems that were mainly backed by non-EU doctorate students.
Overall, Europe lagged behind its overseas rivals in indicators that capture business activity, such as R&D expenditures, and venture capital investments, but also in the share of the population having completed tertiary education.
Fix the problem, not the blame
When it comes to achieving a competitive advantage, it doesn't matter how well you do something, you just need to do it better than others. But how are you going to stay on the cutting edge of global trends, especially in the age of feverish technological advancements, if you keep pointing the finger at Amazon for somehow destroying a business, but, at the same time, revolutionizing a whole industry? Why not try beating it instead?
Europeans are losing valuable time building a labyrinth of regulatory constraints, instead of focusing on what's really important: unlocking creativity and delivering innovation.
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Fani Kelesidou has no position in any stocks mentioned. The Motley Fool recommends Amazon.com. The Motley Fool owns shares of Amazon.com. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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