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ICT, R&D and Non-R&D intangible capital: complementary relations and industry productivity growth in European countries

SPINTAN
SPINTAN

Paper presented in the Third World KLEMS Conference Tokyo, Japan, May 19-20, 2014. It provides descriptive evidence on the dynamics and intensity of intangible investments in a sample of European countries in 1995-2010. It also assesses the impact of intangible capital on European industry productivity growth focusing on the contribution of ICT, R&D and Non R&D Intangibles.

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ICT, R&D and Non-R&D intangible capital:
complementary relations and industry productivity growth
in European countries
C. Corrado, (The Conference Board), New York
J. Haskel, (Imperial College, CEPR and IZA), London
C. Jona-Lasinio, (ISTAT and LLEE), Rome
M. Iommi, (ISTAT and LLEE), Rome
World KLEMS Third Conference
RIETI 19-20 May 2014, Tokyo
C. Jona-Lasinio INTAN-Invest 1 / 23
Introduction
• Our aim
• INTAN-Invest Harmonised Measures of Intangible Investment
• ICT, R&D and Non-R&D Intangible Capital:
• New sources of growth in EU countries-industries
• Complementary relations and productivity growth
• Summing up and next research steps
C. Jona-Lasinio INTAN-Invest 2 / 23
Our aim
• Provide descriptive evidence on the dynamics and intensity of
intangible investments in a sample of European countries in
1995-2010.
• Assess the impact of intangible capital on European industry
productivity growth focusing on the contribution of 3 asset
categories and their synergies:
• ICT, R&D and Non R&D Intangibles
C. Jona-Lasinio INTAN-Invest 3 / 23
Motivation
Based on an econometric analysis of a 10 country, 10 year KLEMS
sample of productivity growth in the EU, Corrado, Haskel and
Jona-Lasinio (2014) 1
found:
• Productivity in ICT-intensive industries is stronger in countries
with relatively fast-growing intangible capital, suggesting
complementarity between ICT and intangible capital
• Non-R&D intangible capital generates productivity spillovers
• Are the spillovers they found the product of knowledge diffusion
or complementarity (or both)?
• With this dataset we will be able to better understand the
underlying mechanisms, as policy implications may not be
necessarily the same.
1Revised, working paper version of paper initially presented at 2nd World KLEMS conference,
August, 2012.
C. Jona-Lasinio INTAN-Invest 4 / 23
Complementary assets, innovation and productivity growth:
main transmission channels
PRODUCTIVITY+
ICT+
Non+R&D+
INTG+
R&D+
INNOVATION+
C. Jona-Lasinio INTAN-Invest 5 / 23
The data
• INTAN-Invest harmonized cross country industry estimates of
intangible investments (www.INTAN-Invest.net)
• Country coverage: Austria, Belgium, Denmark, Finland,
France, Germany, Greece, Ireland, Italy, Netherlands,
Portugal, Spain, Sweden, United Kingdom.
• Industry coverage: NACE Rev2 sectors A through N
(excluding real estate) plus sectors R and S.
• Time coverage: 1995-2010
• EUKLEMS (2012 release)
C. Jona-Lasinio INTAN-Invest 6 / 23

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ICT, R&D and Non-R&D intangible capital: complementary relations and industry productivity growth in European countries

  • 1. ICT, R&D and Non-R&D intangible capital: complementary relations and industry productivity growth in European countries C. Corrado, (The Conference Board), New York J. Haskel, (Imperial College, CEPR and IZA), London C. Jona-Lasinio, (ISTAT and LLEE), Rome M. Iommi, (ISTAT and LLEE), Rome World KLEMS Third Conference RIETI 19-20 May 2014, Tokyo C. Jona-Lasinio INTAN-Invest 1 / 23
  • 2. Introduction • Our aim • INTAN-Invest Harmonised Measures of Intangible Investment • ICT, R&D and Non-R&D Intangible Capital: • New sources of growth in EU countries-industries • Complementary relations and productivity growth • Summing up and next research steps C. Jona-Lasinio INTAN-Invest 2 / 23
  • 3. Our aim • Provide descriptive evidence on the dynamics and intensity of intangible investments in a sample of European countries in 1995-2010. • Assess the impact of intangible capital on European industry productivity growth focusing on the contribution of 3 asset categories and their synergies: • ICT, R&D and Non R&D Intangibles C. Jona-Lasinio INTAN-Invest 3 / 23
  • 4. Motivation Based on an econometric analysis of a 10 country, 10 year KLEMS sample of productivity growth in the EU, Corrado, Haskel and Jona-Lasinio (2014) 1 found: • Productivity in ICT-intensive industries is stronger in countries with relatively fast-growing intangible capital, suggesting complementarity between ICT and intangible capital • Non-R&D intangible capital generates productivity spillovers • Are the spillovers they found the product of knowledge diffusion or complementarity (or both)? • With this dataset we will be able to better understand the underlying mechanisms, as policy implications may not be necessarily the same. 1Revised, working paper version of paper initially presented at 2nd World KLEMS conference, August, 2012. C. Jona-Lasinio INTAN-Invest 4 / 23
  • 5. Complementary assets, innovation and productivity growth: main transmission channels PRODUCTIVITY+ ICT+ Non+R&D+ INTG+ R&D+ INNOVATION+ C. Jona-Lasinio INTAN-Invest 5 / 23
  • 6. The data • INTAN-Invest harmonized cross country industry estimates of intangible investments (www.INTAN-Invest.net) • Country coverage: Austria, Belgium, Denmark, Finland, France, Germany, Greece, Ireland, Italy, Netherlands, Portugal, Spain, Sweden, United Kingdom. • Industry coverage: NACE Rev2 sectors A through N (excluding real estate) plus sectors R and S. • Time coverage: 1995-2010 • EUKLEMS (2012 release) C. Jona-Lasinio INTAN-Invest 6 / 23
  • 7. Intangible investments (chain linked volumes): compounded average rates of growth 1995-2010 0.00# 1.00# 2.00# 3.00# 4.00# 5.00# 6.00# 7.00# 8.00# 9.00# 10.00# Manufacturing+ Services+ C. Jona-Lasinio INTAN-Invest 7 / 23
  • 8. R&D intensity: average values 1995-2010 Map 1 – Value added share of R&D: Manufacturing and Services (Percentage values) Source: EUROSTAT [1.03,2.16] (2.16,3.29] (3.29,4.42] (4.42,5.54] (5.54,6.67] (6.67,7.80] (7.80,8.92] (8.92,10.05] (10.05,11.18] VA share of R&D - Manufacturing (Average shares 1995-2010) [0.26,0.41] (0.41,0.55] (0.55,0.70] (0.70,0.85] (0.85,1.00] (1.00,1.15] (1.15,1.30] (1.30,1.44] (1.44,1.59] VA share of R&D - Services (Average shares 1995-2010) C. Jona-Lasinio INTAN-Invest 8 / 23
  • 9. Non-R&D Intangible intensity: average values 1995-2010 Map 2 – Value added share of Non-R&D intangibles: Manufacturing and Services (Percentage values) Source: INTAN –Invest [3.72,4.41] (4.41,5.11] (5.11,5.81] (5.81,6.51] (6.51,7.21] (7.21,7.91] (7.91,8.61] (8.61,9.31] (9.31,10.01] VA share of Non R&D Intangibles - Manufacturing (Average shares 1995-2010) [4.90,5.80] (5.80,6.71] (6.71,7.62] (7.62,8.52] (8.52,9.43] (9.43,10.33] (10.33,11.24] (11.24,12.15] (12.15,13.05] VA share of Non R&D Intangibles - Services (Average shares 1995-2010) C. Jona-Lasinio INTAN-Invest 9 / 23
  • 10. ICT intensity: average values 1995-2010 Map 3 – Value added share of ICT: Manufacturing and Services (Percentage values) Source: EUKLEMS [0.40,0.77] (0.77,1.13] (1.13,1.50] (1.50,1.86] (1.86,2.23] (2.23,2.59] (2.59,2.96] (2.96,3.33] (3.33,3.69] VA share of ICT - Manufacturing (Average shares 1995-2010) [1.32,2.02] (2.02,2.72] (2.72,3.41] (3.41,4.11] (4.11,4.81] (4.81,5.51] (5.51,6.21] (6.21,6.91] (6.91,7.60] VA share of ICT - Services (Average shares 1995-2010) C. Jona-Lasinio INTAN-Invest 10 / 23
  • 11. Stylised facts • Intangible capital accumulation more dynamic in services than manufacturing (excluding Finland) • R&D, Non-R&D and ICT average intensities: • Broad differences between Northern and Southern Europe • Northern countries relatively more intangible and ICT intensive than Southern countries • Differences are maintained across Manufacturing and Services • Services are more intensive in Non-R&D Intangibles and ICT than manufacturing • Manufacturing is more R&D intensive than services C. Jona-Lasinio INTAN-Invest 11 / 23
  • 12. Extended Growth Accounting Model European countries: • AT, FI, FR, DE, ES, IT, NL, UK Industries: • Agriculture, Mining, Manufacturing, Utilities, Construction, Trade, Financial services, Other services Asset categories and sub-categories: • Tangible Non-ICT, ICT, R&D, and Non-R&D intangibles • Software, R&D, Arch-Des, NFP, Min-Art, Adv-Mkt, Org cap, Training C. Jona-Lasinio INTAN-Invest 12 / 23
  • 13. Contributions to labour productivity growth: 1995-2009 !1.00% !0.50% 0.00% 0.50% 1.00% 1.50% 2.00% 2.50% 3.00% Italy% Spain% Germany% France% Netherlands% Austria% United% Kingdom% Finland% Labour%Quality% Tangible%Capital%Deepening% Intangible%Capital%Deepening% TFP%Growth% C. Jona-Lasinio INTAN-Invest 13 / 23
  • 14. TFP, Tangible Non-ICT, ICT, R&D, and Non-R&D Intangible Capital Deepening: 1995-2009 !1.50& !1.00& !0.50& 0.00& 0.50& 1.00& 1.50& 2.00& Italy& Spain& Germany& France& Netherlands& Austria& United& Kingdom& Finland& Tang%noICT%% ICT% R&D%(1)% Non%R&D%Intang% TFP%Growth% C. Jona-Lasinio INTAN-Invest 14 / 23
  • 15. GA - Main results (1) • More intangible-intensive economies are the faster growth performers. More tangible-intensive countries are the slower growth performers. • ICT exceeds tangible non-ICT capital contribution in the best performers. The opposite holds in the slow growing economies. • R&D and Non-R&D intangibles are relevant sources of growth in almost all sample countries but • ICT, R&D and Non-R&D intangible capital contribution is higher than tangible non-ICT capital contribution in fast growing countries; • Overall contribution of R&D and Non-R&D intangibles is relatively low in the slow growing economies; • Non-R&D intangible contributes more than R&D capital deepening. C. Jona-Lasinio INTAN-Invest 15 / 23
  • 16. Industry contributions to labour productivity growth: 1995-2009 !0.50% 0.00% 0.50% 1.00% 1.50% 2.00% 2.50% IT% ES% DE% FR% NLD% AT% FI% UK% Agriculture&Fishing/ Manufacturing/ Other/industries/(2)/ Trade/ Financial/Services/ Other/Services/ C. Jona-Lasinio INTAN-Invest 16 / 23
  • 17. R&D and Non-R&D Intangible Capital Deepening: contributions to industry productivity growth 1995-2009 0.00# 0.50# 1.00# 1.50# 2.00# 2.50# Manufacturing+ Trade+ Financial+Services+ Other+Services+ C. Jona-Lasinio INTAN-Invest 17 / 23
  • 18. GA - Main results (2) • High heterogeneity of industry contributions to productivity growth • Manufacturing (R&D intensive) is the driving sector in FI, Services (Non-R&D Intangible intensive) in NLD, AT and UK • On average, Non-R&D Intangible capital provides a higher contribution than R&D and mainly in the service sectors • ICT and Non-R&D Intangibles are the main drivers of services productivity growth. C. Jona-Lasinio INTAN-Invest 18 / 23
  • 19. ICT, R&D, and Non-R&D intangibles: what synergies? • Intangible assets may have a stronger effect on productivity growth when interacted with other variables, particularly with ICT. • Main assumption is that intangible assets complement ICT capital so that to realize the potential benefits of computerization, investments in additional assets such as new organizational processes and structures and more trained workers are necessary (Bresnahan, Brynjolfsson, and Hitt (2002) • Productivity growth is higher once the complementary role of intangibles is accounted for (Dahl, Kongsted, and Sorensen (2011); Black and Lynch (2003), Caroli and Van Reenen (2001) and Dearden, Reed and Van Reenen (2006)). C. Jona-Lasinio INTAN-Invest 19 / 23
  • 20. ICT vs Non-R&D Intangibles -2-1012 DlnKH-NonR&DIntangibles -2 -1 0 1 2 DlnKH-ICT “Fr” “De” “Se” “Dk” “Fi” “Uk” “It” “Es” “Nl” “At” Fitted values C. Jona-Lasinio INTAN-Invest 20 / 23
  • 21. ICT vs R&D -1-.50.51 DlnKH-R&D -2 -1 0 1 2 DlnKH-ICT “Fr” “De” “Se” “Dk” “Fi” “Uk” “It” “Es” “Nl” “At” Fitted values C. Jona-Lasinio INTAN-Invest 21 / 23
  • 22. Summing up • Non-R&D intangibles and ICT are relevant sources of productivity growth in advanced economies • Strong correlation between Non-R&D intangibles and ICT suggests they are strategic policy variables • The analysis of the transmission channels through which intangible capital and its synergies with ICT affect industry productivity growth are future key research issues. C. Jona-Lasinio INTAN-Invest 22 / 23
  • 23. Backup slides C. Jona-Lasinio INTAN-Invest 23 / 23