service lives of r&d assets: comparing survey and patent based approaches daniel ker unece...
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Service Lives of R&D Assets:Comparing survey and patent based approaches
Daniel Ker
UNECE Conference of European Statisticians
Geneva, 7th May 2014
Overview
Measuring and capitalising R&D – brief intro
How long is R&D useful for and why does this matter?
Estimating R&D service lives
Results
Conclusions
Measuring and Capitalising R&D
R&D: creative, systematic work to produce knowledge, use of this knowledge for new products or processes of production
Can be bought in, usually produced by user
Treated as investment in SNA08
Measuring and Capitalising R&D
3 key questions to answer:
1. How much R&D is there? Sales for specialists Sum-of-costs for non-market, own-account expenditure data from ‘Frascati Manual’ sources
2. Who uses it? Funders of R&D (from FM sources) Exports of R&D (from ITIS) Survey questions on intended owners
3. How long is it useful for?
How long is R&D useful for?
Service life: ‘the total period during which [the asset] remains in use, or ready to be used, in a productive process’
The period over which the R&D is used in: Products sold Licences granted Policies implemented Research papers published
Not infinite: Superseded by new R&D obsolescence Gradually becomes ‘common knowledge’
Why do R&D service lives matter?
Knowledge capital thought to explain differing economic performance (between countries, industries)
2 key determinants of knowledge stock: the amount of knowledge produced (i.e. R&D output) how long it remains in the stock
“the accuracy of capital stock estimates derived from a PIM is crucially dependent on service lives” (OECD 2009)
“Specifying a service life of 10 years rather than 5 years would make a huge difference to estimates of capital measures. Net capital stock would be approximately double, and with a typical scenario of strong growth, consumption of fixed capital would be appreciably smaller.” (OECD 2010)
Estimating R&D asset lives
Not practical to gather information on each individual assetNeed representative (average, max, min) service lives
1. Estimate from questions on R&D surveys ‘general’ approach – ‘over how many years would the
business expect to benefit from a typical investment in R&D?’ ‘specific’ approach (USA) – identify a specific product which
embodied R&D; over how many years did the business sell this product?
2. Estimate from data on patent renewals Assume patents protect the results of R&D In each year the patent renewal fee is paid, the R&D must be
worth at least as much as the renewal fee Examine number period over which patents are renewed
(‘patent lives’)
Strengths and limitationsSurvey approach
+ specifically targets R&D performed by the respondent
+ more timely
+ can distinguish different types of R&D
+ linked to different industries (via respondent NACE codes)
- may be challenging for respondents – response burden
- delay while responses are collected
Patent approach
+ readymade administrative source
+ direct observations for large population of patents
- assumes patent lives are representative of R&D lives
- have to wait to observe patent ‘death’
- assumes patents only renewed if of value
- ‘artificial’ maximum life due to patent rules
- industry breakdown requires linking to information on owner
Different methods
Mean or Median average lives Frequency distribution of lives highly positively skewed median preferable, less prone to bias But mean common in literature
Weighted or un-weighted averages Desirable to give greater weight to:
Survey responses from firms which perform the most R&D Patents of highest value
Different methods
Survival analysis (patents only) patents can be renewed for up to 21 years (in the UK) patent data covered the 24 years between 1986 and 2010 so relatively few patents had the opportunity to reach the
maximum age of 21 years (only those filed before 1989) downward bias in average life
Many cases are “censored” Observe many patents surviving a number of years (e.g. from
1990 to 2010 = 20 years) BUT do not get to observe the time of death (as it is after 2010)
Kaplan-Meier survival analysis uses the information we have about these patents to produce improved estimates of average patent lives
R&D survival profiles
0
10
20
30
40
50
60
70
80
90
100
0 2 4 6 8 10 12 14 16 18 20 22 24 26 28 30 32 34Age of R&D/Patents in years
Proportion of R&D/Patents surviving Questionnaire: unweighted composite life
Questionnaire: expenditure weighted composite life
Patents: unweighted life
Patents: value weighted life
Patents: average life
Illustrative impact of different service lives on R&D stocks
0
20
40
60
80
100
120
140
160
180
200
0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20
Years
Stock of R&D
20.0
18.8
16.9
14.1
14.0
10.5
10.0
9.5
8.2
8.0
6.0
These are all average R&D lives from the above sources and methods!Large spread (14 years):
shortest = 6 years…un-weighted median from survey longest = 20 years…from Kaplan-Meier analysis of patent lives
Conclusions
R&D service lives are a key determinant of knowledge stocks and hence economic performance
Countries face choices over the data sources used to estimate R&D asset lives
Countries also face choices of the methods applied to these data
Different choices will introduce artificial variation in R&D service lives and reduce the international comparability of R&D stock statistics