madrid - 3 july 2008
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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. - PowerPoint PPT PresentationTRANSCRIPT
Madrid - 3 July 2008
Europe’s R&D: missing the wrong targetBruegel 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
Source: van Pottelsberghe, Bruegel Policy Brief 2008/03,
Total R&D intensity over 25 years
EU’s R&D intensity has been flat lining under 2% for 25 years
Source: van Pottelsberghe, Bruegel Policy Brief 2008/03,
EU(27) in 2006 US (51) in 2004
MaximumSweden
3.8%New Mexico
8.0%
MinimumCyprus and Romania0.42% and 0.46%
Wyoming and South Dakota0.40% and 0.50%
Median across states 1.2% 1.9%
There are strong variations across States, but the distribution is always higher in the US, with 7
States above 4%
Source: van Pottelsberghe, Bruegel Policy Brief 2008/03,
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
AT
BE
CY
DK
ES
FI FRDE
GR
HU
IE
IT
LV
LI
LUNL
PL
PT
SK
SL ES
UK
0
1
2
3
4
-1 -0,5 0 0,5 1 1,5 2 2,5 3
Ratio of the national target (2010) to the
national R&D intensity (2004)
Gap betweent the 3% target and the level of R&D intensity in 2004
Source: van Pottelsberghe, Bruegel Policy Brief 2008/03,
0% 5% 10% 15% 20% 25% 30%
Sub-total electrical-electronical
Office & Computing Machinery
Drugs & Medicines
Professional Goods
Aircraft
Motor vehicles
Non-Electrical Machinery
Other Transport Equipment
Chemicals excl. Drugs
Rubber & Plastic Products
Shipbuilding & Repairing
Non-Ferrous Metals
Iron & Steel
Wood Products, Furniture, Other Manufacturing, nec
Non-Metallic Mineral Products
Petroleum Refineries & Product
Textiles, Apparel & Leather
Food, Beverages & Tobacco
Metal Products
Paper, Paper Prod. & Printing
Services sector
Technological specialization must be accounted for when
analysing countries’ R&D intensity.
Cf. Mathieu and van Pottelsberghe, 2008
Source: Mathieu & BVP, 2008
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
Adj. R-2Without ID: 32%With ID: 69%
Source: Mathieu and van Pottelsberghe, 2008, new results
Regression on
18 countries, 5 years (2000-2004),21 industries
InterceptTimme dummies (ref: 2000)Country dummies (ref: GE)Sectoral dummies (ref: Mach. and equip.)
None of the time dummies are significant
Param. T-statIreland -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 -1,59Belgium -0,009 -1,50Canada -0,007 -1,13Finland -0,005 -0,81The Netherlands-0,004 -0,72Germany as referenceNorway 0,004 0,70Japan 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 5735Adj R-squared 0,5762 Source: Mathieu and van Pottelsberghe, 2008,
new results
R&D intensity, 2000-2004
Higher than Germany
Like Germany
Below Germany
EU wrt USA and Japan(1998-2002, 3 regions, 21 industries)
Source: Mathieu and van Pottelsberghe, 2008, R&D intensity, 1998-2002
0 0,2 0,4 0,6
MEDICAL. & OPT. INSTR.
OFFICE & COMP. MACH.
RADIO, TEL. & COM. EQUIP.
PHARMACEUTICALS
OTHER TRANSP.
MOTOR VEHICLES
CHEMICALS
ELECTRICAL MACH.
MACHINERY & EQUIP.
COKE, REF. PETROL. & …
RUBBER & PLASTICS
NON-METALLIC MINERALS
FABRICATED METAL PROD.
FOOD, BEVERAGES & …
BASIC METALS
SERVICES
TEXTILES, LEATHER & …
USA
EU
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
Source: D. Guellec and D. Pilat, Productivity Growth and innovation in OECD, forthcoming, 08
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 ProcessesThe case of the European Patent Office
The EPS - Cost consequences
Source: François and van Pottelsberghe, 2006, forthcoming0
10.000
20.000
30.000
40.000
50.000
60.000
70.000
80.000
90.000
100.000
110.000
120.000
130.000
EPO3 EPO13 USPTO JPO
Process costs
Process and translation
Process and external serv.
TOTAL 10 years
TOTAL 20 years
1,8564,670 6,575 1,541
8,070 20,175
Source: van Pottelsberghe and François, 2006
The lack of an integrated market for technology
induces very high costs of patenting and a complex
managerial burden on European innovators
London Agreement(1st May 2008)
* 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;
Language in commonwith the EPO (8)
D: NO
C: YES*
D: YES
C: YES
D: EN**
C: YES
D: NO
C: YES
Non-Signatories of LA (19)
PatentD
C
Description
Claims
BE, CH, DE, FR,LI, LU, MC, UK
LV, SI HR, DK, IS,NL, SE
AT, BG, CZ, CY, EE, ES, FI, GR, HU, IE, IT, LT, MT, NO, PL,
PT, RO, SK, TR
Signatories of LA (15)
NO language in commonwith the EPO (7)
The impact of London Agreement on the cost of patenting in Europe, May 2008 (*)
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
0
5,000
10,000
15,000
20,000
25,000
30,000
35,000
40,000
45,000
50,000
EPO-3 EPO-3(LA)
EPO-6 EPO-6(LA15)
EPO-6(LA34)
EPO-13 EPO-13(LA15)
EPO-13(LA34)
EPO-34 EPO-34(LA15)
EPO-34(LA34)
Translation cost
Procedural fees
26%29% 39%
24%48%
21%
62%
Relative cost saving
0
5,000
10,000
15,000
20,000
25,000
30,000
35,000
EPO-13(LA15)
EPO-6(LA15)
USPTO KIPO SIPO JPO BR-PO IN-PO AU-PO CIPO
Renewal fees (up to 10th)
Translation cost
Procedural cost
Cost structure of direct patent fillings and 10 year of maintenance,May 2008 (in US PPP)
Source: van Pottelsberghe and Mejer, 2008, forthcoming
2006 2008
EPO-13 8.5 (10.8) 9.0 (11.4)
EPO-13(LA15) - 6.9 (8.7)
EPO-6 5.2 (6.5) 5.6 (7.1)
EPO-6 (LA15) - 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)
Procedural and translation costs relative to the US (per claim*)
Note: *Numbers in brackets indicate procedural and transaction cost per claim relative to the US.
Source: van Pottelsberghe and Mejer, 2008, forthcoming
USPTO
JPO
EPO-6
EPO-13
AU-PO
SIPO
IN-PO BR-PO
KIPOCIPO
0
1
2
3
4
5
6
7
8
9
10
0.0 0.5 1.0 1.5 2.0 2.5 3.0 3.5 4.0 4.5
CCC Index (US PPPs)
M o
f c
laim
s
Millions of claims filled v. procedural and translation costper claim per million capita (2006)*
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
EPO-6(LP15)
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
0
0,5
1
1,5
2
2,5
3
0 0,1 0,2 0,3 0,4 0,5 0,6 0,7 0,8 0,9
Indu
stry
-fina
nced
R&D
, % of
GDP
R&D performed by the higher education sector, % of GDP
SE
FI
DK
AT
DE
NL
LUFR BE
UKIE
CZ
SIES
ITHU
PTGR
PL
SKRO
Academic research provides new ideas to the market, inducing more applied research and development
for the business sector
Source: van Pottelsberghe, Bruegel Policy Brief 2008/03,
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, ….
F isca l in cen tives
+ s tim u lating - crow d in g outth rou gh p rices
- su bstitu tion - a llocatived is tortions
G ran ts , p rocu rem en ts , loan s , ..
D irect su p p ort
U n ivers ity research
+ sp illovers - a llocatived is tortions
- crow d in g outth rou gh p rices
P u b lic labs
In d irect su p p ort
4 P O L IC Y T O O L S
+
+ 0
-
Impact on business R&D
Impact on growth
nr
+/-+++
Learning from evaluationsGuellec and van Pottelsberghe (2003, 2004)
Regulation : FDA, ...., PATENTING SYSTEM
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, ….
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), 353-376.
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.
References