c l u b e c o n o m i k a 2 o o o intangible investments in bulgaria: challenges for measurement...
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Intangible Investments in Bulgaria: Intangible Investments in Bulgaria:
Challenges for MeasurementChallenges for Measurement
Todor Gradev, Lubomir Dimitrov, Spartak Keremidchiev Todor Gradev, Lubomir Dimitrov, Spartak Keremidchiev
23 23 September 2010, LondonSeptember 2010, London
Project funded by the European Commission under the Seventh Framework Programme
Grant No 217512
Draft
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Overall Scoping of IntangiblesOverall Scoping of Intangibles
Methodology:• Corrado, Hulten and Sickel (2006) - CHS• Marano, Haskel (2006)
Applications• Hao, Manole and van Ark (2008)• Edquist (2009)
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Goal of the StudyGoal of the Study
To measure intangible investments in Bulgaria by applying the new methodology.
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Data Sources in BulgariaData Sources in Bulgaria
• NSI Business Statistics data
• National Account Data
• Vocational Training Surveys
• Labour Force Survey Data
• National Classification of Professions and Occupations
• Survey on Information and Communication Technologies in Non-Financial Enterprises
• Structure of Earnings Surveys (2002 & 2006)
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NACE Industries Producing Intangible AssetsNACE Industries Producing Intangible Assets
7220 Software consultancy and supply
7240 Database activities
7310 R&D in naturals sciences and engineering
7320 R&D in social sciences and humanities
7420 Architectural and engineering activities and related technical consultancy
7440 Advertising
7413 Market research and public opinion polling
7414 Business and management consultancy and activities
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Types of IntangiblesTypes of Intangibles
1. Computerized Information - Software consultancy and supply; Database activities
2. Innovative Property - R&D; Copyright and license costs; New product development in the financial industry; New architectural and engineering design
3. Economic Competences - Brand equity, advertisement; Market research; Firm specific human capital; Organizational structure
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Computerized InformationComputer Software & Computerized DatabasesComputer Software & Computerized Databases
• During the 1998-2006 period the nominal investment in Computer Services increased by 13 times
• Visible Investment in Data Base Services – since 2002-2003. In the preceding years they amount to less than 0.1% of GDP. Since 2002 they increased to 0.5% of GDP in 2006
• The Data Base Services are 15-25% of total Computer Services in 2002-2006 period (being less than 5% before that)
Computerized information
0
0.5
1
1.5
2
2.5
1998 1999 2000 2001 2002 2003 2004 2005 2006
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Computerized Information Software Information – Purchased and In-houseSoftware Information – Purchased and In-house
Purchased Services – revenues of NACE 7221 &7222
In-house Services - method of calculation
– Number of employees by branches (NACE 7221 &7222) – Number of employees by occupation (Computing Services
Department Managers, Computing Systems Designers and Analysts, Computer Programmers, Computer Equipment Operators, Word-processor and Related Operators, Calculating Machine Operators)
– Annual wage in NACE 7220– Working Time Allocation
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Computerized Information How Important are the In-house InvestmentsHow Important are the In-house Investments
Software Investment
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
2002 2003 2004 2005 2006
Purchased In-house9
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Computerized Information Robustness Check – Purchased Software InvestmentRobustness Check – Purchased Software Investment
Investment in software products (% of GDP)
2002 2003 2004 2005 2006
CHS method 0,89 0,88 1,07 1,32 1,31
Estimates using balance sheet data (DR = 33%)
0,37 0,22 0,32 0,46 0,28
Estimates using balance sheet data (DR = 25%)
0,34 0,17 0,28 0,41 0,22
Survey on Information and Communication Technologies in Non-Financial Enterprises
0,24 0,29
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Innovative Property (% of GDP)
• R&D – data from Eurostat• Copyright and license
costs – data from Firms’ Balance sheets (DR = 20%)
• New product development in the financial sector – 20% of intermediate consumption in the sector
• New architectural and engineering design – 50% of revenues of NACE industry 7420 “Architectural and engineering activities and related technical consultancy”
1.85
1.42
1.76
2.27
1.63
2.42
2.18
2.68 2.66
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0.5
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1.5
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2.5
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1998 1999 2000 2001 2002 2003 2004 2005 2006
R & D Copyright and license costs
New product development in the financial industry New architectural and engineering design
Innovative Property - Total
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Innovative Property
• The Innovative Property Investments seem to be cycle dependent (especially Copyright and license costs; New architectural and engineering design)
• The Investments in New architectural and engineering design are growing with a high pace since 1998
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Economic Competences (% of GDP)
1.1
1.9
2.4
2.5
2.7
2.92.8
3.0
2.9
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1.5
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3.5
1998 1999 2000 2001 2002 2003 2004 2005 2006
brand equity - advertisment brand equity - market research firm-specific human capital
organizational structure Economic competences - Total
• Brand equity, advertisement – 50% of revenues of NACE industry 7440 “Advertising”
• Brand equity, market research – NACE 7413 “Market research and public opinion polling”
• Firm specific human capital – Survey of Continuing Vocational Training of Enterprises
• Organizational structure – purchased and in house
• The most striking growth - Brand equity, advertisement; Organizational structure
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Economic Competences Organizational Structure (OS)Organizational Structure (OS)
Organisational Structure (%)
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20%
40%
60%
80%
100%
2002 2003 2004 2005 2006
purchased own-account (8)
• OS (purchased) - NACE industry 7414 “Business and management consultancy and activities”
• OS (own account) - 20% of the wage bill of Class 1 (senior managers) of the National Classification of Professions and Occupations. Data Sources - Structure of Earnings Survey (2002 & 2006); Business Statistics
• During the last years the Purchased OS increased its significance. Occasional evidence suggest that after Bulgaria’s entry into the EU in 2007, these numbers have grown substantially due to the increased TA provided by EU firms and funded by the Union
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Intangible Investment in Bulgaria, % GDPIntangible Investment in Bulgaria, % GDP
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1998 1999 2000 2001 2002 2003 2004 2005 2006
% o
f GDP
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Structure of Intangible InvestmentsStructure of Intangible Investments
Investments in Intangible Assets by Type (as % of Total)
0%
10%
20%
30%
40%
50%
60%
70%
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90%
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1998 1999 2000 2001 2002 2003 2004 2005 2006
Economic competences
Innovative Property
Computerized information
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How Does Bulgaria Compare with the How Does Bulgaria Compare with the Developed Countries?Developed Countries?
Intangible Investment in 2004 (% of GDP)
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UK US France Germany Netherlands* Bulgaria
Computerized information Innovative Property Economic competences
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Intangible Investment by CategoriesIntangible Investment by CategoriesShares of total intangible investments by individual categories, 2000 and 2006
0 0.05 0.1 0.15 0.2 0.25 0.3 0.35
R & D
Design
mineral exploration and copyrightdevelopment
Market research and advertising
Organisational improvement
Software development
Training and skills development
share of investment
2000 2006 18
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• The CHS methodology expands the Intangible Investment concept– New services are treated as
Investment– Expands the treatment of
services already regarded as Investment
• The difference between the traditional and CHS treatment of Intangible Investment is increasing
• The difference between the both concepts amounts to:– 0.5 – 1.0% of GDP in early 90s– 2.0 – 3.0% of GDP in late 90s– 3.5 – 5.0% of GDP in 2000-
2006 period
Intangible Investment (% of GDP)
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1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006
Difference NSI Balance Sheet Data (DR = 25%) COINVEST Methodology
Intangible MeasurementIntangible Measurement
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Main FindingsMain Findings
• From the beginning of the 1990s, as the economy gradually switched from manufacturing to services dominated. We therefore observe a rapid growth of services-dominated intangibles as innovations in finance, computer databases and new software development.
• From the mid-1990s, as the economy became more private ownership dominated. This coincides with the growth of more market-oriented intangibles as organizational structure, brand building through advertising.
• From the early 2000’s, as the economy became more FDI dominated. This is reflected in higher rates of new product design, market research and advertising.
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