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How much does the UK invest in innovation?
Jonathan Haskel
Managing knowledge spaghetti, Imperial, March 2009
The transformation of the economy?
• The old economy
• = tangible assets, production lines
• The new/knowledge economy
• = Intangible assets
• Software, design, R&D, know-how
• Move to knowledge-intensive activities
• Rise of the service sector
• Innovation as a key economic driver
• How well do we measure this activity?
How well do we measure knowledge economy inputs?
• Much focus on R&D
• Official survey/tax credit definition follows Frascati
• “Research and experimental development (R&D) comprises creative work
undertaken on a systematic basis in order to increase the stock of
knowledge, including knowledge of man, culture and society, and the use of
this stock of knowledge to devise new applications”.
• But exclusions are crucial: examples:
•
•
•
•
•
Design
Market research
(Much) software
Training
Organisational change associated with R&D
• Key: measured R&D is spending on “scientific” discoveries
• So retail and financial services R&D = 0
• Suggests want to broaden out R&D to measure knowledge
economy spending
Counting more than just scientific R&D
• Count a wider range of intangible spending
• Upstream: more than just R&D
• Upstream spending also on
• design,
• software,
• Creative endeavour (books, films etc.)
• Downstream: associated coinvestment with
commercialisation of knowldege
• marketing,
• training
• organisational change
• Overall: innovation spending on intangible assets
Broader view of knowledge spend: intangible investment
A. Computerized information
•
Computer software (bought in, own account)
•
Computer databases
B. Scientific and creative property
•
Science and Eng R&D spending, usually leading to a patent/licence
•
Mineral exploration (mostly R&D in oil and minerals)
•
Artistic originals (mostly R&D in creating artistic originals)
•
Other product development, design, research, usually not leading to a patent/licence (I.e. non-scientific
R&D spend)
• product devel costs in fin svcs
• architect and eng design
• R&D in soc sci and humanities
C. Economic competencies
•
Brand equity (to develop reputation capital via branding or trademarks)
•
Firm-specific human capital
•
Organizational structure (organisational capital)
Summary of results
• 1997: Tang invest = £81bn, knwlg invest =
£76bn
• 2005: Tang invest = £96bn, knwlg invest =
£117bn
Memo:
GDP  £1,500bn
RBS toxic asset insurance £270bn
Intan investment by type (% total)
Software
14.3
Scientific R&D
7.9
9.6
0.4
Mineral exploration
Copyright licenses
16.0
0.3
0.2
0.2
Financial services innovation
5.2
6.4
6.3
Purchased architectural & engineering design
6.1
2000
11.1
Own-account architectural & engineering design
2004
12.0
0.4
R&D in social sciences and humanities
0.3
Advertising
9.1
10.4
1.8
Market research
2.6
22.4
Firm-specific human capital
15.0
Organizational structure
0.0
5.0
10.0
15.0
24.3
17.8
20.0
25.0
30.0
%
Research agenda
• Improve measures of spending on this expanded group of
assets (expand the R&D survey)
• Better understand effect of this spending on GDP
• Policy: better understand the market failures that might
make private spending suboptimal (e.g. knowledge
spillovers)