Transcript van Pottelsberghe, Bruegel Policy Brief 2008/03, The R&D

Madrid - 3 July 2008
Europe’s R&D: missing the wrong target
Bruegel POLICY BRIEF 2008/3, March
Bruno VAN POTTELSBERGHE (ULB, Solvay Business School, Bruegel)
– Working Paper with Azèle Mathieu
– Working Paper with Didier François
– Other references
The R&D intensity target
• Since 2002…The Lisbon Agenda
– 3% of GDP should be devoted to R&D
– One third being funded by government
• 1 Observation
• 2 ‘bémol’
• 2 hypotheses
Europe’s R&D:
Missing the wrong target
3.00
Business financed R&D, as a % of GDP
2.50
2000
2006
2.00
1.50
1.00
0.50
0.00
Japan*
United States
Source: van Pottelsberghe, Bruegel Policy Brief 2008/03,
EU-27*
China
EU’s R&D intensity has been flat lining under 2% for 25 years
3.5
Total R&D intensity over 25 years
3
2.5
2
1.5
China
EU-15
EU-27
1
Japan
United States
0.5
1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006
Source: van Pottelsberghe, Bruegel Policy Brief 2008/03,
Source: van Pottelsberghe, Bruegel Policy Brief 2008/03,
Cyprus
Bulgaria
South Dakota
There are strong variations across States, but the
distribution is always higher in the US, with 7
States above 4%
Poland
Louisiana
Nevada
Oklahoma
Kentucky
Portugal
Maine
Hawaii
West Virginia
Georgia
EU(27) in 2006
US (51) in 2004
Sweden
3.8%
New Mexico
8.0%
Italy
Spain
Ireland
Maximum
Tennessee
Missouri
Luxembourg
Slovenia
United Kingdom
Minimum
Arizona
Wyoming and South Dakota
0.40% and 0.50%
Cyprus and Romania
0.42% and 0.46%
Ohio
Median
across states
Alabama
Illinois
Kansas
1.2%
1.9%
Virginia
Idaho
Denmark
North Dakota
Germany
Oregon
New Jersey
New Hampshire
Sweden
Washington
Rhode Island
Massachusetts
New Mexico
0
1
2
3
4
5
6
7
8
The R&D intensity target
• Since 2002…The Lisbon Agenda
– 3% of GDP should be devoted to R&D
– One third being funded by government
• 1 Observation
• 2 ‘bémol’
• 2 hypotheses
Government-funded R&D actually dropped over
the past ten years
• None of the EU member states has fulfilled its self-set
commitment, as no country actually devotes one
percent of its GDP to funding public or business
(through subsidies and procurement) performed
research activities. The only countries that are close to
the 1% target are Sweden, Austria and Finland.
• A large number of countries have actually reduced
their government funding of R&D as a percentage of
GDP. A drop also occurred in the US and Japan over
the same period, but it was largely compensated for by
a more than proportional increase in business-funded
R&D, which was not the case for EU27.
Source: van
Pottelsberghe,
Bruegel Policy Brief
2008/03,
And national reform programs are frequently overambitious,
especially in countries with low R&D intensity
4
Ratio of the national
target (2010) to the
national R&D
intensity (2004)
LV
PL
3
LI
IT
2
LU
DE
1
NL
BE
DK
FI
SL
SK
HU
ES
PT
CY
GR
ES
IE
UK
AT FR
0
-1
-0,5
0
0,5
1
1,5
2
Gap betweent the 3% target and the level of R&D intensity in 2004
Source: van Pottelsberghe, Bruegel Policy Brief 2008/03,
2,5
3
Services sector
Paper, Paper Prod. & Printing
Technological specialization
must be accounted for when
analysing countries’ R&D
intensity.
M etal Products
Food, Beverages & Tobacco
Textiles, Apparel & Leather
Petroleum Refineries & Product
Non-M etallic M ineral Products
Cf. Mathieu and van Pottelsberghe, 2008
Wood Products, Furniture, Other M anufacturing, nec
Iron & Steel
Non-Ferrous M etals
Shipbuilding & Repairing
Rubber & Plastic Products
Chemicals excl. Drugs
Other Transport Equipment
Non-Electrical M achinery
M otor vehicles
Aircraft
Professional Goods
Drugs & M edicines
Office & Computing M achinery
Sub-total electrical-electronical
Source: Mathieu & BVP, 2008
0%
5%
10%
15%
20%
25%
30%
RIi,jt = βjJ + φtT
(1)
RIi,jt = βjJ + αiI + φtT
(2)
18 countries (j) with 21 industries (i) over five years (t)
Country effect without and with industry dummies .
Cf. Mathieu and van Pottelsberghe, 2008, 22 industries, 2000-2004, all estimates include time dummies
CZE
AUS
Industry Dummies
ESP
No industry Dummies
IRL
KOR
ITA
BEL
Adj. R-2
Without ID: 32%
With ID: 69%
DNK
CAN
NLD
GBR
FIN
GER
NOR
JPN
FRA
USA
SWE
0.000
0.020
0.040
0.060
Source: Mathieu and van Pottelsberghe, 2008, new results
0.080
0.100
0.120
Param.
T-stat
Ireland
-0,057
-9,50
Czech Republic
-0,054
-8,30
Spain
-0,052
-8,96
South Korea -0,040
-6,00
Italy
-0,038
-6,25
Australia
-0,027
-4,21
Denmark
-0,021
-3,49
UK
-0,010
-1,59
Belgium
-0,009
-1,50
Canada
-0,007
-1,13
Finland
-0,005
-0,81
The Netherlands
-0,004
-0,72
Germany as reference
Norway
0,004
0,70
Japan
0,013
2,16
USA
0,023
3,95
France
0,025
4,20
Sweden
0,029
4,89
Cons.
0,062
10,26
Number of obs
Adj R-squared
5735
0,5762
*
*
*
*
*
*
*
Regression on
18 countries,
5 years (2000-2004),
21 industries
Intercept
Timme dummies (ref: 2000)
Country dummies (ref: GE)
Sectoral dummies (ref: Mach. and equip.)
*
*
*
*
*
None of the time dummies are significant
Source: Mathieu and van Pottelsberghe, 2008,
new results
Sweden
R&D intensity, 2000-2004
Finland
Japan
United States
Higher than Germany
Like Germany
Below Germany
South Korea
Germany
Denmark
France
Canada
Belgium
United Kingdom
The Netherlands
Australia
Norway
Czech Republic
Ireland
Italy
Spain
0.00
1.00
2.00
3.00
4.00
5.00
EU wrt USA and Japan
(1998-2002, 3 regions, 21 industries)
TEXTILES, LEATHER &…
SERVICES
BASIC METALS
FOOD, BEVERAGES &…
USA
FABRICATED METAL PROD.
EU
NON-METALLIC MINERALS
RUBBER & PLASTICS
COKE, REF. PETROL. & …
MACHINERY & EQUIP.
ELECTRICAL MACH.
CHEMICALS
MOTOR VEHICLES
OTHER TRANSP.
PHARMACEUTICALS
RADIO, TEL. & COM. EQUIP.
OFFICE & COMP. MACH.
MEDICAL. & OPT. INSTR.
Source: Mathieu and van
Pottelsberghe, 2008,
R&D intensity, 1998-2002
0
0,2
0,4
0,6
Comparative advantage of countries in emerging technology fields
(share of patents in the field in the country divided by the share of the field in
total OECD patents). EPO patent applications; Priority Year 2003
3.00
2.50
2.00
1.50
ICT
BIO
1.00
0.50
0.00
Source: D. Guellec and D. Pilat, Productivity Growth and innovation in OECD, forthcoming, 08
NANO
The R&D intensity target
• Since 2002…The Lisbon Agenda
– 3% of GDP should be devoted to R&D
– One third being funded by government
• 1 Observation
• 2 ‘bémol’
• 2 hypotheses
Why do some countries have a higher R&D intensity?
• Expected return…
– Market size: need more integration (USA)?
• No market for technology
• Fragmented systems in Europe: costs and complexity
Patenting Processes
The case of the European Patent Office
Source: van Pottelsberghe and François, 2006
The EPS - Cost consequences
130.000
The lack of an integrated
market for technology
induces very high costs of
patenting and a complex
managerial burden on
European innovators
120.000
110.000
Process costs
Process and translation
100.000
Process and external serv.
90.000
TOTAL 10 years
80.000
TOTAL 20 years
70.000
60.000
50.000
8,070
4,670
20,175
6,575
1,856
1,541
40.000
30.000
20.000
10.000
0
EPO3
EPO13
Source: François and van Pottelsberghe, 2006, forthcoming
USPTO
JPO
London Agreement
Description
(1st May 2008)
Claims
Signatories of LA (15)
NO language in common
with the EPO (7)
Language in common
with the EPO (8)
Non-Signatories of LA (19)
D:
NO
D:
NO
D:
EN**
D:
C:
YES*
C:
YES
C:
YES
C:
BE, CH, DE, FR,
LI, LU, MC, UK
LV, SI
HR, DK, IS,
NL, SE
YES
YES
AT, BG, CZ, CY, EE, ES, FI, GR,
HU, IE, IT, LT, MT, NO, PL, PT,
RO, SK, TR
* Patent granted by EPO has claims translated into 3 official languages of the EPO: English, French and German;
** State having no official language in common with one of the official language at the EPO, may require that translation
of description to be supplied in the official language of the EPO prescribed by that state;
The impact of London Agreement
on the cost of patenting in Europe, May 2008 (*)
50,000
45,000
40,000
Translation cost
35,000
Procedural fees
21%
30,000
Relative cost saving
25,000
20,000
15,000
10,000
62%
24%
26%
29%
48%
39%
5,000
0
EPO-3 EPO-3
(LA)
EPO-6 EPO-6 EPO-6
(LA15) (LA34)
EPO-13 EPO-13 EPO-13
(LA15) (LA34)
EPO-3: DE, FR, UK - with more than 70% of the EP patents validated in 2003;
EPO-6: DE, FR, UK, CH, IT, NL - more than 30%;
EPO-13: DE, FR, UK, CH, IT, NL, AT, BE, ES, DK, FI, IE, SE - more than 12%;
EPO-34: all the EPC contracting states as of May 2008;
Source: van Pottelsberghe and Mejer, 2008, forthcoming
EPO-34 EPO-34 EPO-34
(LA15) (LA34)
Cost structure of direct patent fillings and 10 year of maintenance,
May 2008 (in US PPP)
35,000
30,000
Renewal fees (up to 10th)
25,000
Translation cost
Procedural cost
20,000
15,000
10,000
5,000
0
EPO-13
(LA15)
EPO-6
(LA15)
USPTO
KIPO
SIPO
Source: van Pottelsberghe and Mejer, 2008, forthcoming
JPO
BR-PO
IN-PO
AU-PO
CIPO
Procedural and translation costs relative to the US (per claim*)
2006
2008
8.5 (10.8)
9.0 (11.4)
-
6.9 (8.7)
5.2 (6.5)
5.6 (7.1)
-
4.0 (5.1)
JPO
0.8 (1.9)
0.8 (2.0)
KIPO
0.7 (1.7)
0.7 (1.7)
SIPO
0.5 (1.2)
0.5 (1.2)
CIPO
0.5 (0.6)
0.5 (0.6)
IN-PO
0.5 (1.1)
0.4 (1.0)
BR-PO
0.4 (1.0)
0.4 (0.9)
AU-PO
0.3 (0.4)
0.3 (0.4)
EPO-13
EPO-13(LA15)
EPO-6
EPO-6 (LA15)
Note: *Numbers in brackets indicate procedural and transaction cost per claim relative to the US.
Source: van Pottelsberghe and Mejer, 2008, forthcoming
Millions of claims filled v. procedural and translation cost
per claim per million capita (2006)*
10
USPTO
9
8
M of claims
7
6
5
4
JPO
SIPO
3
EPO-6
EPO-6(LP15)
2
IN-PO
0.0
0.5
BR-PO
1.0
EPO-13
CIPO
AU-PO
1
0
KIPO
1.5
2.0
2.5
3.0
3.5
4.0
4.5
CCC Index (US PPPs)
Note: * The axis x-shows cost per claim per million capita, expressed in US PPPs 2006, and includes process and translation
costs. The axis-y shows the total number of claims filled in 2006 in each patent office. The line indicates the trend between
three main regional offices: EPO, JPO and USPTO.
Source: van Pottelsberghe and Mejer, 2008, forthcoming
Why do some countries have a higher R&D intensity?
• Expected return…
– Market size: need more integration (USA)?
• No market for technology
• Fragmented systems in Europe: costs and complexity
– More Academic research (Sweden)?
• Provides ideas to the market
• Does not compete on the market for researchers
3
Academic research provides new
ideas to the market, inducing more
applied research and development
for the business sector
Industry-financed R&D, % of GDP
2,5
SE
FI
2
DE
1,5
DK
FR
BE
LU
1
AT
CZ
NL
SI
IE
UK
ES
0,5
HU
RO
SK
0
0
IT
PL
0,1
GR
0,2
PT
0,3
0,4
0,5
0,6
0,7
R&D performed by the higher education sector, % of GDP
Source: van Pottelsberghe, Bruegel Policy Brief 2008/03,
0,8
0,9
Why do we have a US and a Swedish exception?
• Expected return…
– Market size: need more integration (USA)?
• No market for technology
• Fragmented systems in Europe: costs and complexity
– More Academic research (Sweden)?
• Provides ideas to the market
• Does not compete on the market for researchers
– Other science and technology policies?
• Subsidies, tax credits…
• Framework conditions, laws, ….
Learning from evaluations
Guellec and van Pottelsberghe (2003, 2004)
Impact on
growth
Impact on
business R&D
4 POLICY TOOLS
Indirect support
Direct support
nr
+
+/- +
Fiscal incentives
University research
Grants, procurements, loans, ..
Public labs
+ stimulating
- crowding out
through prices
+ spillovers
- substitution
- allocative
distortions
- crowding out
through prices
- allocative
distortions
Regulation : FDA, ...., PATENTING SYSTEM
0 ++
- +
Concluding remarks
• International comparisons of R&D intensity must account
for technological specialization
• Very few government have met their own agenda
• Sweden and the USA however stand well above other
countries (as opposed to South Korea, Finland, Denmark)
• Other factors are :
– Market size: need more integration (USA)?
– More academic research (Sweden)?
– Other science and technology policies?
• Subsidies, tax credits…
• Framework conditions, laws, ….
References
van Pottelsberghe de la Potterie B. and D. François, 2008, The cost factor in
patent systems, Journal of Industry, Competition and Trade, in press.
van Pottelsberghe de la Potterie B., M. Mejer, 2008, The London Agreement
and the relative cost of patenting in Europe, CEPR Discussion Paper,
forthcoming.
Guellec D. and B. van Pottelsberghe de la Potterie, 2004, From R&D to
productivity growth: do the institutional settings and the sources of funds
of R&D matter?, Oxford Bulletin of Economics and Statistics, 66(3), 353376.
Guellec D. and B. van Pottelsberghe de la Potterie, 2003, The impact of public
R&D expenditure on business R&D, Economics of Innovation and New
Technology, 12(3), 225-244.
Mathieu A. and B. van Pottelsberghe de la Potterie, 2008, A note on the
drivers of R&D intensity, CEPR Discussion Paper, 6684.
Guellec D. and B. van Pottelsberghe de la Potterie, 2007, The Economics of
the European Patent System, Oxford University Press, Oxford, February,
250 p.