innovation: a dutch european perspective luc soete university of maastricht merit washington,...
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Innovation: A Dutch European perspective
Luc SoeteUniversity of Maastricht
MERIT
http://www.merit.unimaas.nl
Washington, January 27th-28th, 2003
Outline
• Leave it to my colleague Dominique Foray to describe in detail impact of digital technologies on process of innovation: just a couple of remarks
• Focus here rather on knowledge gap between US and Europe: also a reflection of the lower diffusion of ICT in Europe
• Four issues: • EU-US gap in private R&D• mismatch public-private research • human capital gap • innovation gap
Impact of ICT on knowledge production
• Increase in productivity of R&D thanks to the increase in the codification of knowledge and of digital communication between researchers
• Increase in spreading and diffusion of knowledge thanks to digital transparency
• Increase in rate of return to “learning” thanks to digital education forms, distant learning, versioning
Impact of ICT on knowledge productivity
• IT (I factor equivalent to increase/speed in data manipulation, embodied in machines/instruments) increases the social rate of return to research and development, but private rate depends on appropriation and its limits
• CT (C factor aspect of access, networking) increases possibilities for catching up but depends crucially op open access, know-who, barter exchange of knowledge
• ICT increases social and private rate of return to learning (formal and informal education, training)
1. The emerging knowledge and efficiency gap between EU and US
• A long term perspective: lagging behind, catching up and again lagging behind in private R&D
• Reflected in the shift in the relationship with productivity growth between the 60’s and 90’s
• EU-US Business Enterprise R&D gap has grown rapidly over 90’s
• Concentrated in ICT sectors and biotechnology
Figure 1: Business Financed R&D as a % of Value Added
0,00
0,50
1,00
1,50
2,00
2,50
3,00
US
EU
NL
Figure 2a: Relationship between BERD (1967) and productivity growth (1967-1972)
0.00
0.50
1.00
1.50
2.00
2.50
0 1 2 3 4 5 6 7 8 9 10
Anual Growth of labour productivity, 1967-1973 ( Average growth in GDP per man hour)
BE
RD
%G
DP
196
7
IT
DN
BE
SE
UK
NL
EU
FR
JP
US
DE
Figure 2b: Relationship between BERD (1995) and productivity growth (1995-2000)
0
0.5
1
1.5
2
2.5
3
0.5 0.7 0.9 1.1 1.3 1.5 1.7 1.9 2.1 2.3 2.5
Anual Growth of labour productivity,1995-2000 ( Average growth in GDP per man hour)
BE
RD
/GD
P, 1
995
IT
DN
BE
SE
UK
NL
EUFR
JP
USDE
0.0
20000.0
40000.0
60000.0
80000.0
100000.0
120000.0
140000.0
160000.0
180000.0
1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
Millio
n $
1995 C
ns
t. P
r a
nd
PP
P
US
EU
GAP
Figure 3a: Trend in the BERD GAP between EU and US
Figure 3b: Trend in the BERD gap by sector
-20
-10
0
10
20
30
40
50
US
EU
US-EU
Diagnosis
• Dutch insights… • Fragmented RD in the 70’s across EU countries,
strongly linked to national champions efforts• Specialisation across the EU of business RD during
80’s/90’s. Impact of 1992 Single Market on rationalisation of R&D of large MNC’s
• “Attraction” of US in the late 90’s a new phenomenon: concentration of R&D worldwide.
• Efficiency of outside links of R&D activities as important as internal one’s. Hence interest of firms to locate their R&D labs in best local conditions
2. The growing mismatch between public and private knowledge
• No significant gap in public research between EU and US at least until 2000
• Phenomenon of “Dutch knowledge disease”: • Improving quality and strengthening research capacities, but
no specialisation. Trend towards national research “autarchy” • Duality between internationalisation of private R&D as
opposed to nationalisation of public R&D. Growing mismatch
• Similar trends in the rest of Europe? Hence strong need for “ERA” not just of public research, but of public-private research interaction
Figure 3c: Trend in the gap in public R&D
-10000.0
0.0
10000.0
20000.0
30000.0
40000.0
50000.0
60000.0
1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
(milli
on 1
995
$, c
onst
ant p
rices
and
PPP
)
US
EU
GAP
Figure 4: Trend in public, inclusive higher education, R&D
0
0,2
0,4
0,6
0,8
1
1,2
EU
NL
US
0
10
20
30
40
50
60
USA
Netherlands
United KingdomSweden
DenmarkIreland
BelgiumAustria
GermanyItaly
France
FinlandSpain
JapanGreece
Portugal
Figure 5: Highly Cited Publications per 1000 Researchers in Govt or Academia
3. A Human Knowledge Gap
• Significant gap between EU and US in employment of S&E in Business sector
• Ageing of European S&E: from teachers down to professors and S&E researchers
• Renewal rate of human capital in Europe low, immigration levels low, emigration high in those countries with low levels of private BERD
• Need for a reformulation of Barcelona and ERA?
Figure: 6 S&E as % of labour force (growth rates 1995-2000)
0
0.1
0.2
0.3
0.4
0.5
0.6
0.7
0.8
EU 15 US Japan
Business Government Higher education
(2.1)
(0.6)
(2.5)
(3.3)
(3.5)(0.5)
(3.2)
(3.8)
(1.6)
Figure 7: S&T graduates by EU member country
0
5
10
15
20
25
1993 1994 1995 1996 1997 1998 1999 2000
D
F
RL
NL
FN
UK
US
4. The Innovation Gap
• In the end it is the innovation gap which is most important: many factors play a role:
• Patent costs in EU compared to US• Capital costs
• The Lisbon consensus: “the most dynamic and competitive region in the world, while maintaining/activating Europe’s social model”
• Has the real question been asked: link between innovation and risk taking and labour market security, in particular hiring and firing?
Figure 8: Patent costs in EU, US and Japan
American firms grow faster
EU0%
20%
40%
60%
80%
100%
USA
Creation of EU and US firms among the World top 1,000
Since 1980
1950 - 1979
Before 1950
Smaller firms need R&D
Annual growth of GDP 1991- 2000 (%)
Proportion of innovative firms doing R&D (%)
0
2
4
6
8
10
12
0 10 20 30 40 50 60
EUFRES DE
DK
B
FIN
P
AU
NL
IT
IRL
UK
SW
Figure 9: Regulatory barriers index (OECD)
00.5
11.5
22.5
33.5
44.5
5
US UK CA DK FI FR AT SP GE IT SW NL PT
ind
ex
val
ue
Product market regulation Administrative burdens
Burdens on start-up Employment Protection 1998
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