DRIVING INNOVATION AND PRODUCTIVITY - NEW INSIGHTS

Transcription

1 Forum BMVIT Rethinking Innovation Policy Vienna, 17 November 2015 DRIVING INNOVATION AND PRODUCTIVITY - NEW INSIGHTS Dirk Pilat, Deputy Director OECD Directorate for Science, Technology and Innovation dirk.pilat@oecd.org

2 Outline 1. Macro trends and micro insights: productivity, jobs and value chains 2. Innovation and investment in knowledge 3. The digital economy and data-driven innovation 4. Some conclusions and further detail

3 1. There are diverging views on the Future of Productivity and Innovation 3

4 and a Growing Gap in Productivity Growth between Frontier Firms and the Rest Manufacturing Sector Services Sector Most advanced firms (3.5% per annum) Most advanced firms (5.0% per annum) All firms (1.7%) Other firms (0.5% per annum) All firms (0.3% per annum) Other firms (-0.1% per annum) Frontier Ϯ ϖ Ϥ Ϡ Ϥ ψάϥ ψ Ϥ ψϕ ͻ Ϡͻϖ Ά Ϯ Ϥ ϭββ ϕψ Ϡͻϖ ΆϤ Ϯ each 2-digit sector. On a rolling basis. -frontier Ϯ Ϥ average Ϯ ψ Ϥ Ϯ! Ϯ Ϥ Ϥϖ ψ AAGR ψ Ϥ Ϥ Ϥ ͻ ϖϥ! Ϡ Ϥ C ϖͻ ψ Ϡ Gψ Ϯβϭ5 F Ϥ Ϯ technology diffusion and public policy: micro evidence from OECD countries

5 The crisis hit some countries and sectors harder than others, Where people lost and gained jobs, Relative contribution to change in total employment by major sector 125 % Public administration, education, health and other services Financial, insurance and real estate activities Wholesale, retail, hotels, food services and transport Manufacturing Agriculture, forestry and fishing Professional, scientific, technical and other business services Information and communication Construction Mining and utilities Gains, thousands Losses, thousands GRC ESP PRT SVN ITA NLD FIN DNK CZE POL IRL BEL FRA SVK HUN SWE AUT GBR EST DEU EU Source: OECD Science, Technology and Industry Scoreboard 2015,

6 while young firms continued to create jobs, even during the crisis, Contribution to net job creation rate by group of firms, (unweighted average across countries in the non-financial business sector) Old-large incumbents Old-small incumbents Old-large exit Old-small exit Young exit Young incumbents Entry Source: OECD Science, Technology and Industry Scoreboard 2015,

7 although scaling of young innovative firms is a challenge in many EU countries Average size of start-ups and old firms, in persons employed, services sector Start-ups (0-2) Old (>10) Employees Source: Updated from Criscuolo, Gal and Menon (2014),

8 Competitiveness in global value chains is key to the European economy Regional demand for motor vehicles, 1995 and 2011 By country or region of value added origin Source: OECD Science, Technology and Industry Scoreboard 2015,

9 with countries relying heavily on foreign demand for job creation Jobs sustained by foreign final demand, by skill intensity, 2011 and 2013 estimates As a percentage of total business sector employment % High-skilled Medium-skilled Low -skilled Total jobs sustained by foreign final demand, 2013 nowcasts High-skilled jobs sustained by foreign final demand, 2013 now casts Source: OECD Science, Technology and Industry Scoreboard 2015,

10 45 Skills are a major challenge for Europe s innovation-intensive economy Less than 40% of adults have the skills to succeed in a technology-rich environment (Percentage of year-olds scoring at proficiency levels 2 and 3) Level 3 Level Source: OECD Survey of Adult Skills, October 2013.

11 with a high level of skills mismatch that is affecting productivity Potential gains from reducing skill mismatch Percentage of workers with skill mismatch (LHS) Gains to labour productivity from reducing skill mismatch (RHS) Note: The figure shows the percentage of workers who are either over- or under- skilled and the simulated gains to allocative efficiency rom reducing skill mismatch in each country to the best practice level of mismatch. The figures are based on OECD calculations using the OECD Survey of Adult Skills (2012). Source: M. Adalet McGowan and D. Andrews (2015), "Labour Market Mismatch and Labour Productivity: Evidence from PIAAC Data" OECD Economics Department Working Paper No

12 Innovation, resource allocation and business dynamism key policy issues Enable experimentation and firm growth: Reduce barriers to entry (e.g. red tape), growth (e.g. size-specific regulations), and exit/failure of firms (e.g. penalising bankruptcy legislation, overly strict employment protection legislation). Address regulatory incumbency: Policies too often favour incumbents (e.g. R&D tax credits, some environmental regulations, subsidies that delay exit, visa rules, ). Strengthen the innovation system for innovative firms, e.g. through enhanced access to (risk) capital, network development, mentoring of entrepreneurs, skills development, etc. Complete the European Single Market and reduce trade barriers, so firms can scale more easily across borders. Skills: Skills strategies and enabling resource allocation. 12

13 2. Investment in innovation: (much) more than R&D Computerised information (software and data) Innovative Property, including R&D Economic competencies (skills, organisational capital)

14 with knowledge-based capital accounting for half of all business investment in some EU countries, Business investment in fixed and knowledge-based capital (as % of business sector gross value added, 2013) % Non-residential GFCF including machinery and equipment Other KBC assets including organisational capital and training KBC assets in National Accounts including software and R&D Source: OECD calculations based on INTAN-Invest data, and OECD, Structural Analysis (STAN) Database, June

15 .. e.g. strong investment in training in Austria Investment as a percentage of gross value added by type of training Non-Formal Formal Informal % Source: OECD Science, Technology and Industry Scoreboard 2015,

16 The innovation policy mix matters Direct funding of business R&D and R&D tax incentives, as a percentage of GDP, 2013 % Direct government funding of BERD Indirect government support through R&D tax incentives Data on tax incentive support not available Source:OECD, R&D Tax Incentive Indicators, and Main Science and Technology Indicators, June, 2015,

17 .. with Austria providing substantial support to business R&D Business R&D intensity and government support to business R&D, 2013, as % of GDP Volume of tax support to business R&D, Millions USD PPP, 2013 No incentive x No data available USD 75 million USD 250 million USD million ISR x KOR 3.0 JPN BERD, as % of GDP 2.5 FIN USA CHE DNK SVN SWE AUT 2.0 DEU FRA BEL 1.5 CHN ISL NLD AUS HUN 1.0 EST NOR IRL ESP CZE RUS ITA GBR NZL 0.5 SVK POL PRT CAN TUR BRA MEX x ZAF CHL GRC Total government support (direct and tax) to business R&D, as % of GDP Source:OECD, R&D Tax Incentive Indicators, and Main Science and Technology Indicators, June, 2015,

18 Public investment in research remains important Public R&D expenditure by type of research system HERD and GOVERD, as a percentage of GDP, 2013, and total HERD and GOVERD in 2007 % 1.2 HERD GOVERD Total HERD and GOVERD, Source: OECD, Main Science and Technology Indicators, June 2015,

19 with much of the recent demand for jobs coming from outside Europe Origin of demand for jobs in Europe, Millions of persons, annual changes by region of demand EU28 India NAFTA East and Southeast Asia (excl. China) Brazil China Russian Federation Rest of the world Total Millions of persons Source: OECD Science, Technology and Industry Scoreboard 2015,

20 80 % and requires collaboration with research institutions (by firm size, ) As a percentage of product and/or process-innovating firms in each size Large firms category SMEs Source: OECD, based on Eurostat Community Innovation Survey (CIS-2012) and national data sources, June Data available at:

21 International net flows of scientific authors: Austria has gained in recent years Difference between annual inflows and outflows, as percentage of cumulative net flows, Net flows, full period (right-hand scale) % Flow s Source: OECD Science, Technology and Industry Scoreboard 2015,

22 Innovation and research: key messages OECD countries have increasingly emphasized R&D tax incentives in their support for business innovation, but these are not well suited to young firms and can amplify cross-border tax planning strategies of multinational firms Well-designed direct support, e.g. competitive grants, support for Fraunhofer Institutes, accelerators, etc., are better suited to strengthening innovation capabilities. Need for long-term and stable investment in public research, notably basic and mission-oriented research avoid risk of short term focus and fragmentation Important to balance breakthrough and incremental innovation, explore new ways of making more informed strategic choices.

23 3. The use of digital technologies is now almost universal in Austria, Broadband connectivity, by size of firm, 2010 and 2014 (Percentage of enterprises in each employment size class) % 100 All enterprises, All enterprises, Source: OECD, Digital Economy Outlook 2015,

24 and almost all firms are digital, using data as part of their business model TomTom has 5 trillion data points on traffic, adding 6 billion per day. BMW cars have 50 sensors, 7 cameras, can recognize open parking spots for other cars Bla Bla Car processes data on more than 20 million members across 19 countries; out of which 2 million are active every month; Siemens is connecting all machines to the Internet, making them more efficient, and engaging in Industry 4.0.

25 which is also at the core of advanced manufacturing e.g. Industry

26 But there are large differences in the adoption of specific digital technologies The diffusion of selected ICT tools and activities in enterprises, 2014 Percentage of enterprises with ten or more persons employed Gap 1st and 3rd quartiles Austria Lowest Highest % Broadband Website E-purchases Social media ERP Cloud computing E-sales Supply chain mngt. (ADE) RFID Source: OECD Science, Technology and Industry Scoreboard 2015, 26

27 in particular for small and mediumsized enterprises Use of cloud computing as a percentage of enterprises in each employment size class, 2014 % All enterprises Source: OECD, ICT Database; Eurostat, Information Society Statistics and national sources, January

28 Benefiting from the digital economy: main messages Foster an appropriate business environment, by: Fostering investments in broadband & the Internet of Things Removing unnecessary regulatory barriers Addressing market concentration & barriers to competition. Preserving the open Internet and the free flow of data Enhance trust in the digital economy, by: Addressing privacy and security concerns Improving consumer protection Ensure that the benefits are widely shared, by: Strengthening skills for the digital economy Facilitating adjustment Fostering inclusion 28

29 4. In the end, it s all about governance and implementation Governance: Developing a national strategy requires early and adequate involvement of key stakeholders. Moreover, policies makers need to ensure that the full set of government policies that affect innovation are well aligned. Building trust and managing risks: Build trust in government action and ensure the support of stakeholders for policy actions. Develop a policy and regulatory environment that manages the risks associated with innovation. Implementation and evaluation: A commitment to monitoring and evaluation of policies, and on learning from experience and adjusting policies over time, can help ensure that government action is efficient and reaches its objectives at the least possible cost. Better measurement of innovation outcomes and impacts is essential. 29

30 In sum: from innovation policy to a broad agenda of policies for innovation 1. Investment in knowledge-based capital is critical and is more than R&D alone some areas need attention, e.g. data & IPR 2. Effective research and innovation policies, e.g. with a sound balance between R&D tax credits and direct support, and with effective investment in public research 3. Firms in Europe (including Austria) don t grow enough for success at the global level allow new firms to fail or scale and encourage unproductive firms to exit 4. A strong digital agenda 5. Skills are a key challenge requiring a broad and inclusive skills strategy 6. Focus on governance, evaluation and policy learning 30

31 For more detail

32 Thank you Contact: For more information: Website: Innovation Policy Platform: Newsletter: