Digitalisation and Investment in Intangible Capital: The Spanish … · 2019-11-05 · Definition...

Digitalisation and Investment in Intangible Capital: The Spanish Case within the EU

Banco de España – EIB Conference

Aleix Pons

Madrid, 4 November 2019

EVERY CHANGE “not only technological”

BASED ON KNOWLEDGE “not only scientifical”

THAT GENERATES VALUE “not only economic”

An expanded interpretation of the concept of innovation

CHANGE KNOWLEDGE VALUE

INNOVATION

IDEA

SERENDIPITY

TRADITION

Our own methodology to address the challenges:

THE COTEC KEY

EXPERTS

They know what to

do

INFLUENCERS

They say what to do

PIONEERS

They attempted and/or succeeded

in doing so

FACILITATORS

They know how to do

FUTURE OF JOBS

THREE GREAT TRANSITIONS

FROM ANALOGUE TO DIGITAL

FROM LINEAR TO CIRCULAR

FROM TANGIBLE TO INTANGIBLE

Components of S&P 500 market value

Source: Ocean Tomo, 2017

“The big difference between the new economy and the old economy is the changed nature

of investment” – Paul Krugman

“Productivity isn’t everything, but

in the long run is almost

everything”

Intangible Assets Tangible Assets

Definition and classification

of intangible Assets (1/2)

An intangible asset is “an asset that cannot be touched”,

with 4 main idiosyncratic characteristics (“4s”):

1. It has SUNK costs

2. It tends to create SPILL-OVERS that can benefit competitors

3. It is more SCALABLE than a physical asset

4. It is very likely to have valuable SYNERGIES with other

intangible assets

Definition and classification

of intangible Assets (2/2) 1. Computerised Information (software and databases)

2. Innovative Property

3. Economic Competencies

2a. R&D

2b. Mineral exploration and artistic originals

2c. Design

3a. Advertising

3b. Marketing research

3c. Training

3d.i. Own-Account Organisational Capital

3d.ii. Purchased Organisational Capital

Assets included in the National Accounts

(AIPIB)

(1+2a+2b)

Assets not included in the Nacional Accounts

(AIMAPIB)

(2c+3)

Source: European Investment Bank, INTAN-Invest

INTAN-

InvestCOTEC-IVIE

Private sector Total economy

N. of industries 9 27

Regional data

N. of Intangible

Assets6 7

THE INTANGIBLE ECONOMY IN SPAIN: The contribution of Cotec

Cotec-Ivie (2017). Intangible

investment estimation for Spain:

Public and private sector

Regional analysis (NUTS-2)

27 industries

20

17

20

19

Spain is a comparable economy in terms of tangible investment, but we are lagging behind in

terms of intangible investment

59% 59% 57% 55% 55% 51%43% 43%

35%

41% 42% 43% 45% 45% 49%57% 57%

65%

0%

20%

40%

60%

80%

100%

Fin

lan

d

Fra

nc

e

US

A

Sw

ed

en

Th

e

Ne

the

rla

nd

s

Un

ite

d

Kin

gd

om

Ge

rma

ny

Ita

ly

Sp

ain

Intangible investment over total investment*. Last available data

(2015). Private sector. Percentage.

Tangible and Intangible Investment over expanded GDP. Private

sector. Average1995-2015 (%)

6,0

8,39,0

11,2

12,313,1

13,7 13,9

16,2

13,614,5

13,5

10,511,5

10,9 10,9 11,0

14,4

0,00

2,00

4,00

6,00

8,00

10,00

12,00

14,00

16,00

18,00

Sp

ain

Ita

ly

Ge

rma

ny

Th

e N

eth

erl

an

ds

Un

ite

d K

ing

do

m

Fin

lan

d

US

A

Fra

nc

e

Sw

ed

en

*Extended GDP and Investment Note: last available data for Spain, 2016. Source: Fundación Cotec-Ivie, Fundación BBVA-Ivie (2019) e INTAN-Invest (Corrado et al. 2016)

International benchmarking

In addition, we also have a composition problem: Spain invests relatively less in R&D and

organisational capital than leading economies, and relatively more in advertising

Intangible assets investment over GDP (IA/GDP). Private sector, 20151

AI/PIB

SpainEuropean countries

average=100

Ranking with respect to

European countries

Total Intangible Assets 7,3 56,6 8

Mineral exploration and artistic

originals 0,3 115,7 3

Advertising and Marketing Research 1,2 106,3 5

Training 0,9 81,6 7

Software 1,8 64,4 6

Design 1 64,4 7

R&D 1 35,5 8

Organisational capital 1,1 35,3 81 Last available data for Spain: 2016

Below average Above average

Note: last available data for Spain, 2016. Source: Fundación Cotec-Ivie, Fundación BBVA-Ivie (2019) e INTAN-Invest (Corrado et al. 2016)


Annual growth rate of real investment in intangible assets.1995-2015, 2007-2013 and 2013-2015. Private sector.

Percentage.

However, Spain has carried out an outstanding a convergence process during the last 2

decades

1,4

1,8

1,9

2,4

2,6

2,6

3,1

3,4

3,8

0 1 2 3 4

Italy

Finland

Germany

United Kingdom

France

Sweden

The Netherlands

USA

Spain

4,5

2,5

2,8

2,6

5,5

3,3

3,1

0,6

3,2

-4 -2 0 2 4 6

Italy

Finland

Germany

United Kingdom

France

Sweden

The Netherlands

USA

Spain

2007-2013 2013-2015

1995 and 2015 Variation 2007-2013 and 2013-2015

*Extended GDP and Investment Note: last available data for Spain, 2016. Source: Fundación Cotec-Ivie, Fundación BBVA-Ivie (2019) e INTAN-Invest (Corrado et al. 2016)


Intangible Assets can be divided into two groups:

Assets included in the National

Accounts (AIPIB)

Assets not included in the Nacional

Accounts (AIMAPIB)

Source: Fundación Cotec-Ivie, INE

- Software

- R&D

- Mineral exploration and

artistic originals

- Advertising

- Design

- Organisational capital

- Marketing Research

- Training

61% 39%

The Intangible economy in Spain

AIMAPIB would increase national GDP by 3.6%

Extended GDP and Investment over traditional GDP and Investment. Total

economy. Spain, 1995-2016. Percentage.

103,2 103,6

119,7

124,0

100

105

110

115

120

125

130

19

95

19

96

19

97

19

98

19

99

20

00

20

01

20

02

20

03

20

04

20

05

20

06

20

07

20

08

20

09

20

10

20

11

20

12

20

13

20

14

20

15

20

16

GDP*/GDP

Investment*/Non-residential

investment

*Extended GDP and Investment Source: Fundación Cotec-Ivie, Fundación BBVA-Ivie

About this value:

- It has remained stable over the last

20 years

- Intangibles not accounted in GDP

represent nearly two thirds of total

annual investment in machinery and

equipment.



Intangible investment grown above both GDP and tangible investment during the last 20 years

144

220

157

0

50

100

150

200

250

19

95

19

96

19

97

19

98

19

99

20

00

20

01

20

02

20

03

20

04

20

05

20

06

20

07

20

08

20

09

20

10

20

11

20

12

20

13

20

14

20

15

20

16

Tangible Assets

GDP*

Intangible Assets

GDP* and tangible and intangible investment evolution. Total

economy. Spain, 1995-2016 (1995=100)

Crisis Recovery

IA TA IA TA

Spain -10,8% -36,7% 19,9% 24,2%

9 countries average

-7,7% -31% 15,2% 28%


Reinforced leadership: above national

average in 1995 and higher growth rate than

average

Lagging leadership: above national average

in 1995 and lower growth rate than average

Convergent: below national average in 1995

and higher growth rate than average

Divergent: below national average in 1995

and lower growth rate than average

Intangible investment over GDP*. Total economy. Spain and NUTS-2. 2015.

Percentage.


We define 4 squares to define both the initial situation and the evolution of each Spanish region

Regional analysis

Intangible investment over GDP*. Total economy. Spain and NUTS-2. 2015.

Percentage.


Reinforced leadership

Lagging leadership

Convergent

Divergent

There are only 4 regions over national

average:

- C. de Madrid

- Cataluña

- Navarra

- Cantabria

There are only 4 regions above the national average (in yellow)

Regional analysis

Investment composition - Intangible investment over total investment* by industry aggregates. Last available data (2016). Private sector.

Percentage.


40,1 39,835,2 34,9

21,5 19,3

4,6

59,9 60,264,8 65,1

78,5 80,7

95,4

0

20

40

60

80

100

Manufacturing Private

services

Total

economy

Construction Public services Energy Primary sector

Intangible Assets Tangible Assets

There are significant differences in terms of intangible investment across sectors

Sectoral analysis


There are only 4 (out of 27) industries

above national average:

- Manufacture of machinery and

equipment n.e.c. (10)

- Information and communication (18)

- Professional activities (21)

- Private education (23)

4 industries are specially relevant in terms of intangible investment

01

02

03

04 05

06

07 08

09

10

11

1213

1415

16

17

1819

20

21

22

23

24

25

26

27

-6

-4

-2

0

2

4

6

8

10

-6,0 -4,0 -2,0 0,0 2,0 4,0 6,0

IA /

Gro

ss

Ad

de

d V

alu

e e

xte

nd

ed

(1

99

5)

(%)

IA growth rate (1995-2016) (%)

Sectoral analysis

A new world innovation order. Investment flows of the top-1000 R&D investors

Source: PwC

2017: R&D investment increased in Spain for the third consecutive year

R&D total

investment

R&D public

investment

R&D private

investment

Variation 2015-

2016

Variation 2016-2017

Public investment include the government sector and higher education sector

Source: Estadística sobre actividades de I+D 2017, Instituto Nacional de Estadística (INE)

R&D investment grows faster than the economy

R&D total

investment

GDP*

Average

2000-2008

R&D investment vs GDP*Annual growth rate (%)

* GDP at market prices

Source: Estadística sobre actividades de I+D 2017, Instituto Nacional de Estadística (INE) and Contabilidad Nacional (INE)

Since 2009, Spain has lost more than a decade

in terms of convergence to the EU28

EU28 = 100

R&D investment / GDPSpain vs EU28 (Index UE28 = 100)

Spain

Source: Estadística sobre actividades de I+D 2017, Instituto Nacional de Estadística (INE) and Eurostat

R&D investment in Spain is not

adequate to its economic potential

GDP per capita*

* GDP per capita in PPS


Spain

R&D investment

/GDP

Spain

Index UE28 = 100. 2017Index UE28 = 100. 2017

31%

22%

16%

13% 12%10%

-6%-10%

0%

10%

20%

30%

40%

50%

60%

China Alemania UE28 Reino

Unido

Estados

Unidos

Italia Francia España

99%

R&D investment expenditure (% of GDP)

Source: Estadística sobre actividades de I+D, INE, Eurostat, OECD

Cumulative rate of change in R&D investment

2009-2017, based on constant prices.

0,5

1,0

1,5

2,0

2,5

3,0

20

00

20

01

20

02

20

03

20

04

20

05

20

06

20

07

20

08

20

09

20

10

20

11

20

12

20

13

20

14

20

15

20

16

20

17

China Germany EU28 United

Kingdom

United

States

Italy France Spain

The contraction of public investment in Spain quadruples private

since 2009

Cumulative growth rate of R&D investment (%) 2009-2017*

* Total R&D investment at constant prices


France data contains the period 2009-2016 (last available data)

R&D private

investment

R&D public

investment

Germany EU28United

KingdomItalyFrance Spain

Source: Intervención General de la Administración Pública (IGAE)

Pol. 46 budget has decreased by 32% since the beginning of the financial crisis

7.003

3.278

-

2.000

4.000

6.000

8.000

10.000

12.000

20

00

20

01

20

02

20

03

20

04

20

05

20

06

20

07

20

08

20

09

20

10

20

11

20

12

20

13

20

14

20

15

20

16

20

17

20

18

Percentage of budget implementation Pol. 46. Obligations

over credits (%)

Budget vs budget implementation Pol. 46. Millions of EUR.

85,4%

46,8%

40%

60%

80%

100%

20

00

20

01

20

02

20

03

20

04

20

05

20

06

20

07

20

08

20

09

20

10

20

11

20

12

20

13

20

14

20

15

20

16

20

17

20

18

Source: INE

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

2011 2012 2013 2014 2015 2016 2017

Others (companies from the

same group and other national

resources)

Foreing funding (public and

private)

Public funding (subsidies and

contracts)

Loans (public and private)

Own resources

Source of R&D funding . Business sector. 2011-2017.

Millions of EUR.

Spanish companies use their own resources to finance most of their R&D investment

Digitalisation and Investment in Intangible Capital: The Spanish … · 2019-11-05 · Definition...

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