intangibles, innovation & growth: review of coinvest project
DESCRIPTION
Intangibles, Innovation & Growth: Review of COINVEST project. Jonathan Haskel Imperial College Business School, Imperial College London [email protected] All data, papers, presentations: www.coinvest.org.uk Beyond EUKLEMS seminar, Brx Dec 2010 - PowerPoint PPT PresentationTRANSCRIPT
Intangibles, Innovation & Growth: Review of COINVEST project
Jonathan HaskelImperial College Business School, Imperial
College [email protected]
All data, papers, presentations: www.coinvest.org.uk
Beyond EUKLEMS seminar, Brx Dec 2010 COINVEST is a European Commission Framework 7 project funded under
the Socio-economic Sciences and Humanities theme
COINVEST projectQuestions asked to address today• History and theoretical basis of the project• Current state of the project and resulting datasets including
geographical coverage, years and main variables• Specific problems remaining to be resolved• Future data deliveries• Interactions with other projects in the cluster and elsewhere (EU
funded or not)• Policy use so far• Analytical use so far• Potential policy uses• Analytical prospects• The most interesting results so far
• Objective: better understanding of growth and innovation• What drives growth and innovation?
– Henry Ford manufacturing economy: machines = “tangible capital”– iPhone service economy: knowledge = “intangible capital”
• What “intangible capital” is behind the iPhone?– Some R&D– But also: design, software, marketing, business organisation etc.
• So what has COINVEST done?– Measured wide set of intangible assets across 7 countries for the
market sector. Some industry level work where data permits– Integrated such measures with National Accounts– Calculated effects of intangible investment on productivity and
growth– Backed with micro studies
Q1. History and theoretical basis of the project
Q2. Current state of the project and resulting datasets including geographical coverage, years and main variables
• Macro work– Reseachers based in/with contact in national statistic bureau for
countries: Bulgaria, France, Germany, Portugal, Sweden, UK, US, 1980-2004/5/6
– Measure investment in intangible assets• Software• Innovative property (R&D, Design, Product development in finance)• Firm competencies (Branding, Training, Organisational capital)
– measure impact on growth by growth accounting– vary original Corrado et al method
• Data posted on web for these countries, different versions per country based on different assumptions, deliverable 9 on www.coinvest.org.uk
• Micro work– Accounting data, new questionaires, micro firm data
Q3. Specific problems remaining to be resolvedQ4. Future data deliveries
Q5. Interactions with other projects
• Q3. Data issues– More consistent measurement especially of big ticket items: training and
design– Implementation of software method for design and financial services– Organisational capital– Deflators
• Q4. Future data– Ongoing work using UK data on all of above
• Q5. Interaction with other projects– Data designed to fit with KLEMS-type approach– Innodrive: we have gone beyond CHS method. Training data to be
resolved– Interactions with various domestic projects e.g. UK innovation index,
capitalisation of R&D– Welcome future interaction
Q6. Policy use so far, Q7. Analytical use so farQ8. Potential policy uses
• Q6. Policy use so far– OECD
• COINVEST data Figure 1 in OECD innovation strategy and ministerial release.• Central role in innovation conceptual and measurement strategy• Further meetings at NESTI and Washington National Academy Science, Feb 2011. Feeding into
innovation survey design– EU
• Various presentations in Brussels • Presentation to Mrs. Geoghhegan-Quinn. Approach adopted by high-level committee on the
measurement of innovation in Europe, chair Prof Mas-Collel– Sweden
• Used by IFN in policy briefs, presented in Swedish Parliament• Follow meeting in Euro Parliament, 2nd Feb 2011
– UK• Centrepiece of UK innovation index and UK annual report (other indicators dropped)• Key evidence in UK science budget policy• Extensively quoted in Treasury documents • Work presented to Governer and Monetary Policy Committee of Bank of England
• Q7. Analytical use so far– Macro spending, growth accounting, cross-country correlations – Micro/accounting studies
• Q8. Potential policy uses– Cross-country comparisons with policy variables– Evaluation of private and social returns to market sector spend– Role of public sector R&D– Design of innovation surveys
Q9. The most interesting results so far
Intangibles are assets (Average benefit lives by asset, years)
• UK firm-level study on how long companies expect to benefit from typical investments in various intangible assets
2.7
3.2
2.8
4.6
4.0
4.2
0.0
1.0
2.0
3.0
4.0
5.0
Training Software Reputation & Branding R&D Design Business ProcessImprovement
Asset Category
Av
era
ge b
en
efi
t li
ve
s (
ye
ars
)
Intangible/tangible investment varies significantly across countries (2006, % market sector GDP, COINVEST + other countries)
Sweden, Germany intensive in R&DUK, US intensive in competencies
(Investment by intangible asset share in GDP, 2005 selected countries)
2.23 0.83 1.98 1.41 0.73 1.43 1.42
6.07
3.27
5.483.18 3.58
4.732.90
2.81
3.48
4.44
3.30 2.84
5.86
5.36
0
2
4
6
8
10
12
14
Japa
n
Port
ugal
Swed
en
Fran
ce
Ger
man
y US
UK
%GDP
Software and databases R&D and other intellectual property products Brand equity, firm training, organisational capital
Industry picture: UK, Sweden intensive in finance
Intangible and Tangible investment as a share of VA by industry and by country, 2006
(VA adj for Intangibles)
0%5%
10%15%20%25%30%35%40%45%50%
UK Germany Sweden UK Germany Sweden UK Germany Sweden
Manufacturing Financial and business svc Retail hotel transport
Intangible Tangible
Intangible contributionsRetail: similar; Mfr: Sweden high;
Finance: UK highComponents of Labour Productivity Growth, %
29%13% 14% 9% 9% 9% 9% 13%
10%
5% 6% 22% 15% 18% 17% 5%
39%68%
47%41%
50%45% 47% 59%
19% 12%29% 24% 27% 22% 24% 20%
-20%
0%
20%
40%
60%
80%
100%
Intangible cap deep Tangible cap deep Labour quality Intermediate Inputs TFP
TFP 19% 12% 29% 24% 27% 22% 24% 20%
Intermediate Inputs 39% 68% 47% 41% 50% 45% 47% 59%
Labour quality 3% 2% 5% 3% 0% 6% 3% 3%
Tangible cap deep 10% 5% 6% 22% 15% 18% 17% 5%
Intangible cap deep 29% 13% 14% 9% 9% 9% 9% 13%
Sweden Germany UK Sweden Germany UK Sweden UK
Manufacturing Retail Financial and business svcs
Growth accounting (selected countries, 1995-06)
0.30 0.22 0.18 0.40-0.15
1.40
0.910.64 0.83
0.430.68
0.90
1.231.33
0.950.69 0.88
1.30
0.690.82
0.330.48 0.37
-0.5
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
4.5
Swed
en UK US
Japa
n
Fran
ce
Ger
man
y
% Labour quality Physical capital deepening Multifactor productivity Intangible capital deepening
Policy
• What policy variables are associated with cross-country intangible investment?
0.00%2.00%4.00%6.00%8.00%
10.00%12.00%14.00%
0 20 40 60 80 100 120
inta
n in
v (%
gdp)
days required to open a business
Intangibles and Barrier of Enterpreneurship
US
AUDK NL
UKSE JPFIFR
IT AT CZDE
ELSK
ES
0.00%
2.00%
4.00%
6.00%
8.00%
10.00%
12.00%
14.00%
0 0.5 1 1.5 2 2.5 3
inta
n in
v (%
gdp)
R&D as a % of gov budget
Intangibles and R&D in Gov Budget
USJPUK
FR
ES
SE
NLDE
DK
ITATCZSK
EL
Source: Hao et al. (2009) for Germany, France, Italy and Spain; CHS (2009) for the US , Marrano et al. (2009) for the UK, Jalava et al. (2007) for Finland, Fukao et al. (2009) for Japan, Edquist (2009) for Sweden, Van Rooijen-Horsten et al. (2008) for the Netherlands and Barnes and McClure (2009) for Australia. R&D as a share of governmetn budget is from Eurostat.
Summary
• A portfolio of results – macro – micro (accounting, Innovation survey and
questionaire data)
• More to do– Comparability and robustness– Data development, especially deflators– Policy analysis
Spares
UK Intangible Investment Survey
• Survey– Conducted by ONS in October 2009– Voluntary postal survey of 2,004 UK companies with ten or more
employees across the production and service sectors. Response rate 42%
– Stratified by industry and employment– Linkable via business register
• Questions – Firms’ spending on main intangible assets: R&D, software,
training, branding, design, organisation or business process improvement
• Own account and • Bought in
– Life lengths • Priorities
– Ask for own account data– Linked to business register
Layout of questionnaire
Assets divided into sections
Each section has a filter question which defines the asset with examples
Then asks purchased and own-account
Finally life lengths
% of respondent firms conducting intangible investment by asset category
• Confirms: non-R&D intangible spending is much more widespread than R&D spend
35%
30%
22%
8%
10%
13%
0%
5%
10%
15%
20%
25%
30%
35%
40%
Training Software Reputation & Branding R&D Design Business ProcessImprovement
Asset Category
Perc
en
t o
f fi
rms c
on
du
cti
ng
in
tan
gib
le a
sset
Total expenditure by category (£m), weighted to give estimates of UK totals
• Observe importance of in-house spending
2360
3616
6433
4366
309649
4700
77162732
4864
847728
0
2000
4000
6000
8000
10000
12000
Training Software Reputation & Branding R&D Design Business ProcessImprovement
asset Category
To
tal
ex
pe
nd
itu
re (
£m
)
In-house
Purchased
Summary
• Intangible investments are structured way of thinking about growth and innovation
• Becoming part of measurement systems anyway– Software treated as investment– R&D to be so treated
• Need new questionnaires: some being developed
The intangibles agenda
• What drives growth?– Using more of existing factors = factor accumulation– Using existing factors better or developing new ones
= new ideas = innovation
• Traditional approach– Account for output by
• Factor accumulation: in practice tangible factors• Labour quality• Innovation = the residual: that is, the increase in output that
cannot be explained by increases in tangible inputs
The intangibles agenda, 2
• Strength of growth accounting framework – Conditional on assumptions, consistent account of growth– Linked with core economic and national accounting measures,
e.g. GDP– Link with economic theory means provides framework for
evaluating where private and social returns differ = policy framework
– Very successful in understanding the ICT revolution• Weakness of framework
– Relies on strong (?) assumptions– Measurement issues formidable– Account of innovation in the traditional approach (output, tangible
capital, labour quality) not strong:• Has to be freely available knowledge• Policy makers and non-economists find residual approach
unsatisfactory
The intangibles agenda, 3• Dissatisfaction with the residual moved innovation focus to
– Patents– Innovation surveys and innovation indicators– Innovation scoreboards
• Growth accounting focus became– IT revolution– R&D
• Innovation literature became rather disparate…• Many IT papers very much in growth accounting framework
– Backed by theory, strong measurement focus: core questions (did IT earn normal market returns?)
• Much other innovation work– Patents work v detailed but
• Subset of innovation• Citations data noisy• Changes in registration methods affect time series
– Innovation survey work wider than just R&D, but • Disconnected with other measures e.g. problems with time series
• Hanging over this is feeling that innovation process has changed– Strongly related to IT, but broader e.g. organisational change– User innovation– Open innovation: companies innovating without patents– Innovative sectors are retailing, banking, airlines
The intangibles agenda, 4• The Corrado, Hulten, Sichel approach: extend the boundaries of
growth accounting to more intangible assets besides R&D– Software– Innovative property
• R&D• Design• Financial services product development
– Economic competencies• Marketing• Training• Firm organisational capital
• Timely because– Fits with idea that innovation is more than just a residual– Fits the ICT revolution intuition that implementing ICT needs co-
investment in branding, new organisations etc.– Keeps the discipline of outputs and inputs– Fits with the broader innovation idea…