Download OECD Counterfeiting & Piracy Project

Sixth Annual Research Money Conference, Ottawa, 8
March 2007
International Trends in Industry Research Incentives
IAIN GILLESPIE
Head, Biotechnology Policy Division
Contact: [email protected]
1 1
OECD work on science and innovation



OECD work on science and innovation is carried out in the
Committee for Scientific and Technological Policy, made up of
delegates from member countries.
The priorities are established by countries in a 2-yearly work
programme.
The output of the work includes:
– Analytical reports, e.g. on Public-Private Partnerships or Science-Industry
Links.
– Policy reports, e.g. country reviews of innovation policy.
– Policy guidelines, e.g. on licensing of genetic inventions.
– Statistics, indicators and benchmarking reports, e.g. OECD’s bi-annual
Science, Technology and Industry Scoreboard.

In practice, a platform for exchange, analysis and discussion on good
policy practices.
2 2
Recent trends – Growing R&D intensity in several
OECD countries (R&D as % of GDP)
1995 (1)
2000 (2)
2004 (3)
%
4.5
4.0
3.5
3.0
2.5
2.0
1.5
1.0
0.5
d
M
ex
ico
lan
Po
ly
ain
Sp
Ita
S w pan
itz
er
la
nd
Ice
la
nd
U n K or
ea
ite
d
St
at
es
Ge
rm
a
D e ny
n
T o m ar
k
ta
lO
EC
D
Fr
an
c
Ca e
na
da
Be
lgi
um
Un
EU
ite
-1
d
5
Ki
ng
do
m
EU
Ne
-2
5
th
er
lan
ds
Au
str
al
ia
No
rw
ay
Ir e
lan
d
d
Ja
an
Fi
nl
Sw
ed
en
0.0
3 3
Source: OECD, Science, Technology and Industry Outlook 2006, December 2006.
Biotechnology R&D
Total expenditure on biotechnology R&D by biotechnology-active firms, Million PPP$, 2003
United States
14,232 7.0
Germany (2004)
France
Canada
1,347
3.3
1,342
5.7
12.0
1,194
Denmark (1)
727
23.8
Korea (2004)
699
3.2
Switzerland (2004)
8.6
469
Israel (2002)
251
4.9
Italy (2004)
236
2.8
China (Shanghai)
205
Australia
201
3.8
199
3.1
Spain (2004)
New Zealand (2004)
95
20.9
88
2.4
84
4.2
Iceland
67
51.4
Norway
29
2.0
5
0.6
Finland
South Africa (2002)
Poland (2004)
0
2,000
4,000
6,000
8,000
10,000
12,000
14,000
16,000
4 4
BIOTECHNOLOGY
DIVISION
But R&D spending still falls short of national
targets in most countries
(current R&D spending and official targets, as % of GDP, in %)
4.5
4.0
Most recent R&D measure as % GDP
R&D target as a % GDP
3.5
% GDP
3.0
2.5
2.0
1.5
1.0
0.5
E
C
U
hi
-1
ne
5
se
Ta
ip
ei
D
en
m
ar
k
G
er
m
an
y
Fi
nl
an
d
ds
he
r
la
n
-2
5
U
Note: Most national targets refer to 2010.
Source: OECD, Main Science and Technology Indicators, 2006-II, December 2006;
OECD, Science, Technology and Industry Outlook 2006, December 2006..
N
et
E
a
us
tri
or
w
Lu
ay
xe
m
bo
ur
g
N
K
ni
te
d
U
A
in
gd
om
na
hi
C
la
nd
Ire
ry
H
un
ga
ol
an
d
P
n
pa
i
S
us
si
a
R
G
re
ec
e
0.0
5 5
Raising R&D intensity primarily involves greater
investment in business R&D (R&D as % of GDP, 2005)
Business R&D
Other R&D (1)
5.0
4.5
4.0
3.5
3.0
2.5
2.0
1.5
1.0
0.5
M
e
Ar xico
ge
nt
in
Tu a
rk
Po ey
Ru So rtu
ss uth gal
ia
n F Af
ed r ica
er
ati
on
Ita
ly
Ne
Sp
w
Ze ain
al
an
Ir e d
la
nd
Un
ite
Ch
d
Ki ina
ng
d
Au om
str
ali
a
Ne EU
th - 25
er
la
nd
Ca s
na
da
F
To r an
C h t al O ce
in
es ECD
eT
ai
Ge pei
Un rm
ite
a
d ny
St
Sw ate
itz s
er
lan
Ko d
re
a
Ja
pa
Fi n
nl
a
Sw nd
ed
en
Isr
ae
l
0.0
Note: (1) Other R&D includes government, abroad and other sources.
Source: OECD, Main Science and Technology Indicators, 2006-II, December 2006.
6 6
But business R&D is influenced by structural
factors, such as firm size …
3.0
Sweden
2.5
BERD as % of GDP
Finland
2.0
Japan
Korea
US
Switzerland
Germany
1.5
•
Iceland
Denmark
UK
France
Belgium
1.0
Norway
Canada
Australia
0.5
Czech Rep
Spain
Portugal
0
10
20
30
Italy
Hungary
Poland
0.0
Netherlands
Turkey
M exico
40
50
60
70
80
90
Share of R&D performed by large firms
Source: OECD R&D Database
7 7
100
.. industry composition …
(R&D in the business sector adjusted for variations in industry structure)
Country structure
G7 industry structure
% of business sector value added
4.5
4.0
3.5
3.0
2.5
2.0
1.5
1.0
0.5
Source: OECD, Going for Growth, based on ANBERD Database
E
SW
U
SA
R
N
O
JP
N
FR
A
D
EU
FI
N
K
D
N
N
LD
L
BE
G
BR
D
O
EC
CA
N
R
K
O
S
A
U
IT
A
IR
L
P
ES
E
CZ
PO
L
0.0
8 8
The contribution of selected industries to aggregate R&D
intensity in the business sector
2.5
IT Manufacturing
Pharmaceuticals
Motor vehicles
Other manufacturing
Total services
Total business sector
1.5
0.5
-0.5
Source: OECD, based on ANBERD and STAN Database
E
SW
FI
N
U
SA
JP
N
D
EU
R
K
O
K
D
N
FR
A
L
BE
G
BR
N
LD
R
N
O
CA
N
IR
L
S*
A
U
IT
A
P
ES
PO
L
-1.5
9 9
.. and the contribution of foreign affiliates
(R&D expenditure of foreign affiliates as % of total business R&D)
1995 (1)
%
2000 (2)
2003 (3)
80
60
40
20
Source: OECD, Science, Technology and Industry Outlook 2006
10 10
Ja
pa
n
e
ec
y
G
re
rk
e
ak
Tu
ce
R
ep
ub
U
ni
lic
te
d
St
at
es
Fi
nl
an
d
Po
la
nd
an
l
Fr
Sl
ov
rtu
ga
ai
n
Po
Sp
m
an
y
s
G
er
nd
rla
Ita
ly
et
he
N
an
ad
a
Sw
ed
en
C
st
ra
lia
Au
do
m
ic
Ki
ng
ub
l
ni
te
d
U
C
ze
ch
R
ep
um
d
la
n
Ire
Be
lg
i
H
un
ga
ry
0
The key policy question:
How to foster greater private investment in R&D
11 11
What policies to foster business innovation?
 Providing good framework conditions for business:
 Good infrastructure, highly skilled workforce, tax climate, etc.
 Intellectual property rights – to provide incentives for investment
 Through support measures:
 R&D tax credits
 Direct support (grants, loans, etc.)
 Public-private partnerships
 Initiatives at the local and regional level.
 OECD countries use a mix of these instruments
12 12
Reform of product market regulation has increased business
R&D intensity in OECD countries
Source: OECD (2006), Going for Growth
13 13
Framework conditions are important
determinants of business R&D …

OECD analysis shows that:
– Reducing anti-competitive product market regulations stimulates business
R&D, as it strengthens the incentives to innovate.
– A low level of restrictions on foreign direct investment can improve cross-border
knowledge transfers.
– Stable macroeconomic conditions and low real interest rates help to encourage
the growth of innovation activity.
– The availability of internal and external finance is an important determinant of
innovation expenditures.
– Improved corporate profitability and higher stock market capitalisation both
have a positive effect on innovation expenditures.
14 14
… as are innovation policies

OECD analysis shows that:
– Policies that help to make foreign knowledge more accessible can be very
effective in fostering business R&D.
– Expanding public research can support business sector research, but
expanding both will require efforts to raise the supply of human resources.
– Fiscal incentives can be effective, especially when firms face financial
constraints. Tax reliefs for private R&D are found to provide a stronger stimulus
to business R&D than direct government subsidies.
– The case for further strengthening of intellectual property rights for patent
holders in OECD countries appears weak. Excessively strong intellectual
property rights can be counterproductive as it may reduce product market
competition.
15 15
Trends in OECD countries in the use of support
measures for business R&D

Some streamlining of support programmes:
 Efforts to reduce the range of programmes
 Growing focus on competitive-based and merit based competitive funding
 Growing focus on innovation instead of R&D, greater attention for services
 Growing focus on supporting networks and clusters, instead of individual firms

R&D tax credits in search of more efficiency:
 New R&D tax credits for labour charges in some countries (Belgium, Spain,
Netherlands)

Focus on leveraging government procurement policies to foster innovation
and develop lead markets, in particular in Europe

Overall: in search of “smarter ways” to support innovation
16 16
G
Ne erm a
wZ
n
ea y
la n
d
Gr
ee
Sw ce
ed
e
Ice n
la n
Fi n d
lan
Po d
la
Sw
itze nd
rla
Be nd
l giu
m
Ire
Un
la
i
Un t ed S nd
it e
d K t ates
i ng
do
Au m
st
Au ria
str
al
Fra ia
nce
Ko
De
nm re a
a
Hu rk (2
ng
)
ary
(
Ja
pa 3)
n(
No 4)
rw
Ne
th e ay
rla
n
Po ds
rt u
g
Ca al
na
d
Me a
xi c
o
Ita
ly
Sp
a in
Tax credits remain an important instrument
(Implicit tax subsidy for 1 USD of investment in R&D, 2005)
0.5
Large firms
0.4
SMEs
0.3
0.2
0.1
0.0
-0.1
Source: Warda (2006), STI Working Paper 2006/4
17 17
Sw Jap
i tz an
er
la
C
hi Ca nd
ne n
se ad
Ta a
ip
M ei
ex
ic
N Ir e o
et l a
he nd
rla
n
F i ds
n
Au land
st
ra
li
Ko a
re
C a
G hin
er a
m
a
Sw ny
Si ed
n
e
T o gap n
ta o r
lO e
EC
EU D
-2
N Fr 5
U ew anc
ni Z
te ea e
d
K lan
in d
gd
o
U N m
ni or
te w
d
a
S y
ta
te
Sp s
ai
n
Ita
Po ly
la
nd
Direct support for business R&D remains
important
(share of government-financed R&D in total business R&D, 2004, in %)
20
18
16
14
12
10
8
6
4
2
0
Source: OECD, Main Science and Technology Indicators 2006/II
18 18
Adapting incentives to a changing business environment
19 19
Elements of the changing environment for business innovation







Shorter time-to-market. Greater competition, shorter product lifecycles, erosion of dominant positions.
Expanding technological opportunities--Hard to maintain necessary
competencies in-house; uncertainty about future technology &
markets
Increased cost and risk. Cost of innovation is growing, particularly
in capital-intensive industries.
Globalisation of markets, S&T capabilities, production.
Increased mobility of S&T workers. Increases rate of diffusion of
knowledge
User-driven innovation: greater involvement of users.
Innovation in services: Of growing importance to OECD countries.
20 20
Changing Firm Strategies:
From Closed to Open Business Innovation
Old model: closed innovation
 Firms identify needed
technological advances
 Firms conduct R&D
internally, often in
corporate laboratories
 Firms incorporate
advances into new
products & services
 Product revenues finance
additional R&D






New model: open innovation
R&D linked to business strategy
(new funding models, incentives)
Acquisition of technology
(licensing, corporate VC, M&A,
collaborative research)
Externalisation of R&D results
(licensing, spin-offs)
Globalisation to tap into worldwide knowledge and talent
More diverse set of innovators
(public sector, SMEs, services)
Greater role of users
21 21
Closed Innovation
A linear progression…..
Discovery
Development
Delivery
…Diffusion
22 22
Match innovation and
market needs
Enabling environment?
Research
Policy
Policy
Environment
Energy
etc
IDENTIFICATION of
NEED
(
DIFFUSION
RESEARCH
Industry
Policy
DELIVERY
DEVELOPMENT
COMMERCIALISATION
Regulatory/
Legislative
Policy
Incentives?
Decisions
23 23
Some potential implications for innovation policy

The role of public research organisations:
– Less basic research in the business sector – a growing
importance for basic research from the public sector
– Focusing on scientific excellence and relevance/valorisation
of public research

Government support for business R&D:
– Will direct support measures and tax incentives still be
effective in fostering business investment?
– Is the broader environment for innovation becoming even
more important?

Intellectual property:
– Balancing incentives for innovation and diffusion
– Using IPR to create value
24 24
Collaborative mechanisms for IP …..

The role of patent pools
– Platform based technologies – DVD, MPEG

Or Clearing Houses
– SNPs Consortium

Open source
– software
– Informatics
……. Models for success in technology convergence….?
25 25
What next for innovation at OECD?




OECD Ministerial meeting in May will have strong focus on innovation.
Policy interest in innovation is growing:
–
In the long term, innovation is the main source of sustainable growth
–
Innovation may help in addressing other global challenges, such as climate
change, the environment, energy needs, etc.
–
Globalisation and the emergence of new global competitors is pressuring
OECD countries to move up the value chain and strengthen innovation.
But despite growing importance, little progress in many OECD countries.
Possible reasons for lack of progress:
–
Innovation depends on a wide range of factors: business-friendly environment,
strong education and science system, good links between science and
business.
–
Coordinating policies across a wide range of policy domains can be difficult.
–
Innovation may not always be the most attractive policy goal: it is not often a
priority for the general public.
–
Improving innovation is challenging, as is requires a long-term commitment.
26 26
A possible next step for the OECD: development of a
comprehensive OECD Innovation Strategy
A coordinated effort to support policy development:
1.
Policy recommendations to boost innovation performance, both general
and country specific. This would include the identification of good policy
practices, and where appropriate, the development of policy guidelines.
2.
Improved frameworks to monitor and review the innovation environment
and the performance of the innovation system.
3.
Strengthened mechanisms and forums for international discussion and
co-operation, including with emerging economies.
4.
Improved analysis clarifying the links between policy domains, such as
those between innovation and entrepreneurship and how innovation
contributes to achieving economic, social and environmental goals;
5.
Development of better metrics to identify and benchmark innovation
performance and the factors and policies influencing it.
27 27
In sum: OECD is there to help countries and governments improve innovation
policies and innovation outcomes
Contact for further information:
[email protected]
Internet site:
www.oecd.org/sti/stpolicy
Thank you.
28 28