Innovation and innovationInnovation and innovation ... · new evidence from the OECDOECD Science,...

Innovation and innovationInnovation and innovation policies: new evidence from theScience, Technology, Industry Science, Technology, Industry

Scoreboard 2011Scoreboard 2011Scoreboard 2011 Scoreboard 2011 Chi C i l OECDChiara Criscuolo, OECD

ScienceScience, Technology, gy,Industry Scoreboard 20112011

Innovation and growth in knowledge economies

The value of the STI Scoreboard

• Wide-ranging resource book of indicators• To inform policy making• Broad scope – includes BRIICSp• New indicators

K l d i t d d f t

The STI Scoreboard 2011Knowledge economies – trends and features

Building knowledgeg g

Connecting to knowledge

Targeting new growth areas

Unleashing innovation in firms

Competing in the global economy Competing in the global economy

RoadmapI ti d i ti li i t d • Innovation and innovation policies today: new evidence from the OECDOECD Science, Science, Technology, Industry Scoreboard 2011Technology, Industry Scoreboard 2011

• Why should we support Innovation?Why should we support Innovation?• What are the policy tools available?

h h ff f h l• What are the effects of the policies?• Policies for the services sector?Policies for the services sector?

Investing in R&D and talentInvesting in R&D and talent is critical

Gross domestic expenditure on R&D, 1999 and 2009as a percentage of GDPp g

0.98

0.77

1.39

4.55

15.4

0

0.64

1.09

41.2

4

8.48

0.92

0.03

100.

00

1.94

4.79

0.80

2.51

30.4

7

0.10

4.15

1.29

0.29

0.48

12.5

1

0.07

0.41

0.41

0.04

2.12

2.54

3.11

0.16

0.21

0.49

0.80

0.43

0.21

0.06

0.10

0.63

45

%

23

1999

s a %

of t

otal

O

ECD

R&D

pe

nditu

re, 2

008

01

SR IN WE 8) PN NK 8) 8) EU UT 8) 8) 8) RA EL AN 27 VN BR LD RL OR

HN 9) RT ZE ST

SP TA US 7) UN 8) UR OL 7) VK 8) 7)

As

exp

IS FI SW

KOR

(199

9, 2

00 J P DN

CH

E (2

000,

200

USA

(199

9, 2

008

DE AU

ISL

(199

9, 2

00

OE

CD

(199

9, 2

008

AU

S (2

000,

200

8

FR BE CA

EU

2

SV GB

NL IR

NO

CH

LUX

(200

0, 2

00 P R CZ ES ES IT RU

NZL

(199

9, 2

007

HU

ZAF

(200

1, 2

008

TU PO

GRC

(199

9, 2

007

SV

CH

L (2

00

ME

X (1

999,

200

SOURCE: OECD, Science, Technology and Industry Scoreboard, 2011.

Building a critical mass in scienceR&D in OECD and non-OECD economies, 2009 or latest available year

R&D in OECD countries,2009 or latest available yearResearchers, per thousand employment

FIN

ISL

14.0

16.0BRIICSNorth AmericaEU27Other OECD members

R&D Volumes in 2000 USD -constant prices and PPP

1 Billion

10 Billion

USA

JPN

KORSWE

DNK

NOR

PRT

NZL

ISL

10.0

12.0100 Billion

DEU

FRA

GBRCAN

RUS

AUS

ESP

AUT

CHE

BEL

PRT

IRL SVN

LUXSVK

EST

6.0

8.0

ITA

NLD CHE

TUR

POL

CZEHUN

GRC

2.0

4.0

CHNMEX

ZAFCHL

0.00.0 0.5 1.0 1.5 2.0 2.5 3.0 3.5 4.0

Gross domestic expenditures onR&D as a percentage of GDP

R&D expenditure by performing sectors, 2009

% B i t i Hi h d ti G t P i t fit

80

100

% Business enterprises Higher education Government Private non-profit

60

20

40

0


Business enterprise expenditure on R&D, 1999 and 2009 as percentage of GDP

3.0

%0

2.0

1999

0.0

1.0

R N E ) N ) ) K ) U ) ) A ) L N ) N L 7 R N E R D S T P N A T ) ) R K L ) ) )

ISR

FIN

SW

EO

R (1

999,

200

8JP

NH

E (2

000,

200

8S

A (1

999,

200

8D

NK

UT

(200

2, 2

009

DE

UC

D (1

999,

200

8S

L (1

999,

200

8FR

AU

S (1

999,

200

8B

EL

CH

NU

X (2

000,

200

9S

VN

IRL

EU

27G

BR

CA

NC

ZEN

OR

NLD

RU

SP

RT

ES

PH

UN

ITA

ES

TZA

F (2

001,

200

8N

ZL (1

999,

200

7TU

RS

VK

PO

LE

X (1

999,

200

7R

C (1

999,

200

7C

HL

(200

8

KO C U A

OE

C I A L Z N M GR


Manufacturing vs. Services

Business R&D in the manufacturing sector by technological intensity, 2008As a percentage of manufacturing business enterprise R&D

90

100

% High-technology Medium-high technology Medium-low and low technology

50

60

70

80

20

30

40

50

0

10


Value added of innovation-intensive manufacturing sectors, 2008 as a percentage of total manufacturing value added

%32: Radio, television and communication equipment 34: Motor vehicles and trailers

40

45

% 24: Chemicals and chemical products 33: Medical, precision and optical instruments23: Coke and refined petroleum products

25

30

35

10

15

20

0

5


Largest 4 industries in manufacturing…share of valued added, 2008

35

%

C30T33 Electrical and optical equipment C23T25 Chemical, rubber, plastics and fuel productsC29 Machinery and equipment, n.e.c. C27T28 Basic metals and fabricated metal productsC15T16 Food products, beverages and tobacco C34T35 Transport equipmentC21T22 Pulp, paper, paper products, printing and publishing C17T19 Textiles, textile products, leather and footwearC26 Other non-metallic mineral products Sum 2000

25

30

35

15

20

5

10

0

Largest 4 industries in servicesshare of valued added, 2008

90%

65-67 Financial Intermediation 50-52 Wholesale and retail trade; repairs 70-74 Real estate, renting and business activities

60-64 Transport, storage and communications 55 Hotels and restaurants Sum 2000

60

70

80

40

50

60

10

20

30

0

Share of services in business R&D, 1998 and 2008% 1998

70

80

90

% 1998

40

50

60

10

20

30

0


Researchers in manufacturing and services, 2009 (per thousand employment in industry)

14

Manufacturing Services Not elsewhere classified‰

10

12

4

6

8

0

2

4

Patent quality index

Korea has high quality patents

Patent quality index by technology field, 2000-10

Italy

Finland

Engines, pumps, turbines

Polymers

Telecommunications

Germany

Denmark

Japan

Solar energy

Wind energy

Micro- and nano-tech

Patent quality index

Country with the maximum patent quality index

tions

Bio materials

Digital communication

Canada

United States

tech

IT methods

Fuel cells

Electrical machinery

Audio-visual tech.

T til d

Materials, metallurgy

Basic communication

Environmental

Australia

Norway

Textile and paper machines

Computer tech.

Medical tech.

Israel

Environmental tech.

Machine tools

Other consumer goods

Denmark

0.0 0.1 0.2 0.3 0.4

Biotechnology

Index

0.0 0.1 0.2 0.3 0.4

Semiconductors

Index


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Korean patents are highly citedHighly cited patent applications to the EPO (top 1%), 1996-2000 and 2001-05

40% 2001-05 1996-2000

Highly cited patent applications to the EPO (top 1%), 1996 2000 and 2001 05As a share of all EPO patent applications in the top 1% in their field

30

Number of top 1% cited patents,

2001-05

1.5

2.0Magnified

20

0.5

1.0

0

10 0.0


But when looking at trademarks…T d k li ti t JPO OHIM d USPTO b t ti t GDP 2007 09

810

JPO

14.9

23.9

ns U

SD

PP

P

52.

0

Trademark applications at JPO, OHIM and USPTO by country, ratio to GDP, 2007-09 average

6

OH

IMJ

Mag

nifie

d

over

GD

P in

bill

io

0.5

1.0

1.5

24

US

PTO

Trad

emar

ks o

0.0

IDN

RU

SIN

DB

RIIC

SP

OL

BR

AS

VK

CH

NG

RC

TUR

HU

NZA

FC

ZE

0

IDN

RU

SIN

DB

RIIC

SP

OL

BR

AS

VK

CH

NG

RC

TUR

HU

NZA

FC

ZES

VN

ES

TP

RT

JPN

CH

LE

SP

MEX

KO

RN

OR

ITA

BE

LEU

27FIN

FRA

AU

TD

EU

NLD

GB

RIR

LS

WE

DN

KA

US

ISR

NZL

CA

NLU

XIS

LC

HE

OE

CD

US

A


Boosting Innovation: di li ia diverse policy mix

Boosting innovation in the economyDirect government funding of business R&DIndirect government support to business R&D (R&D tax incentives)Total government support to business R&D

Direct government funding of b i R&D

0.45

0.50

% Indirect government support to business R&D (R&D tax incentives)

0.45

0.50

%

0.45

0.50

%

business R&D and tax incentives for R&D, 2009

0 25

0.30

0.35

0.40

0 25

0.30

0.35

0.40 No data/cost estimate available

0 25

0.30

0.35

0.40

0.10

0.15

0.20

0.25

0.10

0.15

0.20

0.25

0.10

0.15

0.20

0.25

0.00

0.05

0.00

0.05

0.00

0.05


Business R&D intensity and government support to business R&D, 2009As a percentage of GDP

4 5

BERD intensity, as % of GDP

ISR

3.5

4.0

4.5

Indirect tax support to business R&D, 2009 (Million USD PPP)

No incentive / estimate

USD 75 million

USD 250 million

USA

JPNKOR

SWE

FIN

CHE

2.5

3.0

USD 2 500 million

FRA

AUS BEL

AUT

DNK

SVN

ISL

DEU

CHNLUX

CHE

1.5

2.0

CANGBR

NLD

TUR

ESPPRT

IRL

HUN

NORCZE

SVN

ZAF

POL

NZL

RUS

CHL

EST

SVK

MEX

ITAGRC

0.5

1.0

CHL SVK0.00.00 0.05 0.10 0.15 0.20 0.25 0.30 0.35 0.40 0.45 0.50

Total government support to business R&D, as % of GDP


Why Public supportT I ti ?To Innovation?

Why public support to R&D?Public support to R&D addresses the less-than-socially-optimal

private investment stemming from projects with large expected social benefits but inadequate expected private returns (Arrow social benefits but inadequate expected private returns (Arrow, 1962).

Government support to R&D aims to address market failures, and in pp ,particular to:

• Align private and social return, and mitigate the “incomplete private appropriability” problem (Nelson, 1959; Arrow, 1962);

• Correct for information asymmetries that lead to financing constraints especially for young and small firms

Supporting R&D: policy toolsTwo broad R&D policy instruments exist: Two broad R&D policy instruments exist:

1) Direct procurement and public funding of knowledge-based innovative activities carried out by public entities (universities, research centres, etc.);

) bli i l i i i f f2) Public support to commercial R&D, i.e. incentives for a greater amount of private investment, in the form of:

Tax incentives: based on firm-level R&D activity: market based tool.

Directly reduce marginal cost of R&D activities

Allow private firms to choose projects

Di t R&D b idi j t ifi t lDirect R&D subsidies: project-specific tools

Allow public bodies to target projects with perceived high marginal social rates of return

Grants vs fiscal incentivesR&D • R&D grants

Directed at specific projects (government/government agency chooses)

Often targeted to national needs

Sometimes targeted to collaborative research (with universities; government; other firms)

Sometimes “ pick-the-winner” strategy (see also Wallsten, 2000)

T i ti f R&D• Tax incentives for R&DAccelerated depreciation - usually 100%, i.e., expensing

Allowances – amounts that can be deducted from income for tax purposes (>100%)(>100%)

Credits – amounts deducted from tax liability

Market base method / affect price of R&D

More on R&D tax credits• Close gap between private and social return to R&D by lowering its • Close gap between private and social return to R&D by lowering its

cost

• Can also be used to target specific areas (more generous):i hBasic research

Small & medium-sized firms

Collaborative research

Energy

• Widely used in OECD countriesE.g. in US; Canada; Australia; UK; France; Spain for exampleg ; ; ; ; ; p p

Not available in e.g. Germany and Finland (grants)

• Design: Incremental vs. Volume base

Volume base R&D tax credit Australia, Canada, France, Norway, Brazil,

Details of differences in R&D tax incentives schemes across selected OECD countries (2009)

Design of the R&D tax incentive scheme

Volume base R&D tax credit Australia, Canada, France, Norway, Brazil, China, India

Incremental R&D tax credit United StatesHybrid system of a volume and an incremental credit

Japan, Korea, Portugal, Spainincremental creditR&D tax allowance Denmark, Czech Republic, Austria,

Hungary, UKPayroll withholding tax credit for R&D wages Belgium, Hungary, Netherlands, Spain

More generous R&D tax incentives for SMEs Canada Australia Japan UK HungaryMore generous R&D tax incentives for SMEs Canada, Australia, Japan, UK, Hungary, Korea, Norway

Targeting

Special for energy United StatesSpecial for collaboration Italy, Hungary, Japan, NorwaySpecial for new claimants FranceSpecial for new claimants FranceSpecial for young firms and start‐ups France, Netherlands, Korea

Ceilings on amounts that can be claimed Italy, Japan, US, Austria, Netherlands

Income based R&D tax incentives Belgium, Netherlands, Spain

No R&D tax incentives Estonia, Finland, Germany, Luxembourg, Mexico, New Zealand, Sweden, Switzerland

R&D support: direct and indirect effects• Relieve firms of (some) R&D and innovation costs;

• Improve the risk‐return pattern (also on other projects);

• Allow conducting further R&D projects at lower costs;

• Help firms updating their know‐how, which may in turn result in knowledge spillovers benefitting other firms (Klette et al 2000);spillovers benefitting other firms (Klette et al., 2000);

• (Especially small and/or young firms) have a certification effect (e.g. Lerner, 1999; Blanes and Busom, 2004). This lowers firms’ cost of capital at the margin, when applying for external sources of financing. Grants act as a signal of “good quality” for firms and projects, and reduce information asymmetry.

R&D expenditures of foreign-controlled affiliates, 2008as a percentage of Business Expenditure on R&D

%

60

80

40

20

0


R&D support and location of R&D• R&D support policies are used to attract internationally mobile R&D support policies are used to attract internationally mobile

R&D– even if R&D grants/tax incentives might affect the location of MNEs

R&D investment, there are other factors that are more important. • for MNEs laboratories aimed at doing basic research (the “R” in R&D)

(e.g. Thursby and Thursby, 2006; Belderbos et al. 2007; Alcacer and Chung, 2007; Branstetter et al., 2006)

l l i d h l i i i i f i h – access to local science and technology, proximity to university frontier research and centres of excellence, availability of a skilled workforce, engineers and scientists and strong intellectual property rights.

• for R&D labs engaged in development (the “D” in R&D) (e.g. Defever, 2006 and von Zedwitz and Gassman, 2001)

– access to local markets and proximity to other corporate activities, such as d i i d i i l lproduction sites, and proximity to local customers

Other aims/impacts of R&D support

• Induce firms to start conducting R&D

• Incentivise firms to conduct R&D jointly with universities

• Indirect effect on scientists wagesg

Policy makers may want to evaluate effect of R&D y ytax credits/grants on all these outcomes

Evaluating the effect of R&D supportSince Griliches (1958) and Blank & Stigler (1957) many investigated:Since Griliches (1958) and Blank & Stigler (1957), many investigated:

• Input additionality, i.e. the complementarity or substitutability of public and private R&D funds (especially additionality VS crowding out) (David et al, 2000 and Hall and Van Reenen, 2000 for a survey);

• Output additionality, i.e. the returns to R&D support programmes in terms of, e g innovative output productivity growth etc (Klette et al 2000 for a survey)e.g., innovative output, productivity growth, etc.. (Klette et al, 2000, for a survey)

Not many have investigated indirect effects on:

S i ti t ( G l b 1998 d L k hi d M h 2008)• Scientists wages (see Goolsbee, 1998 and Lokshin and Mohnen, 2008)

• Location of R&D activities (Bloom and Griffith, 2001 and Wilson, 2008)

• R&D start‐up decisions (Norway Skattefunne programme evaluation)

Innovation broader th R&Dthan R&D

Innovation is much broader than R&D…

Product innovators by R&D status 2006-2008 R&D ti fi Fi ith tR&D

y

80

90

100

% R&D active firms Firms without R&D

50

60

70

10

20

30

40

0


Innovation strategies in the servicesP d t i ti l P d t & k ti i ti l i ti M k ti i ti l i ti l

80

100

% Product or process innovation only Product or process & marketing or organisational innovation Marketing or organisational innovation only

60

20

40

0


Current OECD projects • Innovation in services (INNOSERV): ( )• new evidence on the role of R&D in service innovation through quantitative analysis of micro

and sectoral data and the development of new indicators.

• Analysis of the barriers to R&D and innovation in services as well as of the role and impacts of y ppolicies (through questionnaires and case studies) will help identify good practices and strengthen the evidence base for the formulation of new policies which better take into account the specificities of service innovation

• New Sources of Growth; Intangible Assets (NSG) :

• structured evidence of the economic value of intangible assets as a new source of growth; and

• Improved understanding of current and emerging challenges for policy, addressing such areas as taxation, competition, intellectual property rights, the regulatory treatment and use of private and public data, and corporate reporting.

Thank you!

Chiara Criscuolo@oecd [email protected]

Looking at productivity…

510

%2001-07 2007-09

y

2009-10

05

bour

pro

duct

ivity

-5Gro

wth

in la

b

-10

…and labour utilisation2007 09 2009 10

10 %

2001-07 2007-09 2009-10

5

ilisa

tion

-50

wth

in la

bour

uti

-10

Gro

w

Innovation and innovationInnovation and innovation ... · new evidence from the OECDOECD Science,...

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