Advancing Innovation-Related Metrics: Globalization and Capitalizing Intangibles Francisco Moris Georgia Tech International Workshop on New Directions for Innovation Measurement May 13, 2008 National Science Foundation www.nsf.gov/statistics fmoris@nsf.gov 703-292-4678 NOTE: The views expressed here are those of the author and do not necessarily reflect NSF views. 1
Overview Selected policy analysis needs OECD Task Force, SNA & other international statistical manuals Special focus Measuring int l trade in R&D Multinational companies (MNCs) activities Data development strategies 2
Policy analysis needs on globalization and innovation National Science Foundation Geographical dimensions of innovation: FDI and outsourcing; clusters; regions Organizational aspects of innovation: open innovation; management of innovation; international transactions Links between innovation and performance Role of R&D and other intangibles in GDP and other socio-economic impact measures Returns on publicly-funded R&D Impact of globalization in the national accounts 3
Int l Statistical Manuals and Task Force on R&D and other IP Products The SNA manual provides guidance on national product and income accounts (NIPA). R&D will be recognized as investment (fixed asset) in the revised (2008) SNA. This also represents a methodology to measure its impact in GDP, productivity growth. However, implementation requires addressing methodological and data difficulties, the subject of a new joint OECD Task Force. Concurrent revisions: BoP Manual and Manual on Statistics of Int l Trade in Services (MSITS) S&T Statistical manuals: Frascati, OSLO 4
R&D in the National Accounts: Satellite Accounts A satellite account (SA) uses methodology consistent with national economic accounts, but applied to activities that are not separately identified in the core accounts. An R&D SA considers R&D as an economic investment or capital, that is capitalizes R&D. BEA/NSF R&D SA Data releases so far: Sept 2006 and 2007 Ongoing methodological research: industry-level data and international flows Long-term plans: incorporation of R&D into the core NIPA accounts in 2013 5
OECD Task Force on R&D and other Intellectual Property Products The Task Force is developing a Handbook on capital measures for intangibles, intended as a a companion of the revised SNA, to include: R&D (SNA93 1.51, 6.163/165, 6.142) Software and databases (10.92/93) Mineral exploration and evaluation (10.90/91) Entertainment, literary or artistic originals (10.94/95) Cross-cutting issues: overlaps (e.g. software R&D vs. software services); int l transactions 6
R&D issues being addressed by Task Force FM and SNA bridge; mutual improvement Identifying R&D expenditures that should be recorded as GFCF Avoiding double counting Deriving estimates of rates of return, service lives, and price indices International trade in R&D (to compute domestic stocks) 7
International Trade in R&D Global and collaborative R&D; outsourcing and FDI Increased S&T capabilities in emerging countries Increased tradability of services Imply increased int l knowledge flows earlier in the innovation process 8
International trade in R&D within MNCs (3-way intersection): brings together separate statistical areas, standards, and challenges 9
OECD Task force National Science Foundation R&D Trade Sub-group Work Plan (1) Defining R&D exports and imports (2) Identifying data; indicators inventory across OECD (3) Use of trade data in adjusting domestic R&D stocks & impact in current account, capital account (4) Improving data; input to MSITS revision R&D, National accounts, Balance of Payments staff 10
Definition and characterization of R&D exports/imports Difficulties defining R&D trade given intangible nature, do exports really mean a subtraction from domestic stocks? (also issue for other services/intangibles) Is FDI R&D an export/import? R&D exports/imports: transactions of R&D services between residents & non-residents, as captured by mode 1 of int l delivery of services, cross border supply (MSITS 2.16). 11
Data sources on R&D exports/imports Balance of Payments data Direct/bank reporting systems Survey data: services trade surveys; FDI surveys R&D surveys; other S&T surveys Little or no data on cross-border transfers (one-way flows) and on transactions in prior R&D : CB sale/purchases of R&D-based patents; CB M&As involving R&D-performing companies; CB capital transfers 12
Issues in services trade & MNC statistics Distinguishing between R&D services and other business technical services Intra-MNC transactions: payment structure and data capture issues e.g., bundling of payments with royalties and license fees; free transfers Intra-MNC transactions: valuation issues costs/profits allocation affected by accounting rules and tax considerations (transfer prices) 13
Figure 3. Relationship among indicators on business R&D trade FM-based RD surveys SNA-BMP-MSITS-based int l transaction surveys Extramural R&D Expenditures (EE) by Business Enterprises (BE) Extramural expenditures sent to abroad by BE (EEABE) BERD Funding from abroad for BE (FABE) Trade in Private Services BPT or Other Business Services EEABE funds sent to overseas businesses of which: to affiliated and unaffiliated business FABE from overseas business of which: from affiliated and unaffiliated business R&D services Equivalent indicators (except as noted in the text) Exports: of which to affiliated and unaffiliated businesses Imports: of which from affiliated and unaffiliated businesses 14
Table 3. Availability of Indicators on R&D Exports and Imports (OECD data) 15
Measuring international trade in R&D R&D surveys funding data can provide estimates of imports ---but mostly cost-based data and exclude imports from non-r&d performers. R&D services statistics from int l transaction surveys consistent with market transactions and BoP basis ---but doesn t follow (scientific) R&D definition since includes non-r&d testing services. Issues across data sources overlap across intangibles, intra-company transactions 16
Norway: RDT exports vs. FABE and RDT imports vs. EEABE, million NOK 2,500 2,000 2,000 1,800 1,600 1,400 1,500 1,200 1,000 1,000 800 600 400 500 200 0 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 0 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 RDT-Imp EEABE RDT-Exp FABE Funding from Abroad for BE (FABE); Extramural expenditures to abroad by BE (EEABE) RDT Research, development, and testing services NOK 1.00 = US$ 0.19; 0.09; C$ 0.19; A$ 0.21; R 1.28; 0.13; NZ$ 0.24 as of February 2008. Data sources: R&D Survey (Statistics Norway) and OECD Trade in Services Database. 17
Norway: RDT vs. R&D funding/ee balance, million NOK 600 400 200 0-200 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005-400 -600-800 -1000-1200 RDT balance Funding balance 18
Findings so far on R&D trade indicators Data from multiple sources have different advantages/disadvantages. Little or no data on transfers and on transactions in prior R&D. Short term needs devise recommendations for adjustments to existing data, reconciliation of multiple sources Long term strategy surveys development, data linking, microdata research, micro vs. macro approaches 19
Data Development Strategies Most details needed on MNCs transactions involving intangibles are unlikely to be feasible from national or large-scale surveys. Sector or topic-specific data from academic research in int l R&D/IP transactions are needed. Benefits of complementary approaches may be maximized by considering structure and gaps of national level statistics. 20
Data Development Strategies (2) Official statistics: surveys redesign; interagency statistical projects; international collaboration Academic research on metrics using official statistics and/or new research data: SciSIP Bilateral national or sector-specific studies on R&D transactions; MNCs innovation strategies Innovation & microdata: trade in services data could be added to ongoing OECD/EU work linking CIS, R&D, and economic survey data Other intangibles data needs: worker training, marketing and advertising, organizational change 21
Globalization of R&D: FDI Link What do we want to know NSF/Census Industry R&D Survey Scope: For-profit R&D performers located in U.S. Data: sales, employment, R&D R&D details: Basic, applied, development Distribution by state Type of cost, technology Contracted out Foreign ownership EINs BEA Surveys: Foreign Direct Investment in the U.S. and U.S. Direct Investment Abroad Scope: U.S. & foreign MNCs Data: sales, employment, R&D Other operations data: Property, plant, equipment Balance sheets and income statements Gross product Royalties and license fees COMBINED DATASET with NEW DETAIL 22
NSF Science of Science and Innovation Policy (SciSIP) Goals Understanding: develop theories and models Measurement: improve and expand science metrics Community of practice Grand challenges Full systems approach models, tools, and data on science, technology, and innovation Evaluative measures; spillovers Decision-making tools Accounting of int l flows in intangible assets and workforce 23
NSF SciSIP Solicitation II The FY 2008 competition includes three areas: Analytical Tools, Model Building, and Data Development and Augmentation. Proposals were due last March and are currently under review. Contact: Dr. Julia Lane, jlane@nsf.gov http://www.nsf.gov/sbe 24
Recap: Data Development Strategies on Globalization and Intangibles National statistics: surveys redesign; interagency statistical projects (R&D SA; intangibles NAS conference) Int l statistical collaboration: SNA, new Handbook Academic research on metrics: SciSIP Research opportunities: Transactions in R&D/IP (FDI, outsourcing, alliances) Innovation, trade, and economic microdata linking Training and other human capital indicators Intangibles & business/financial accounting 25
The Role of MNCs in U.S. Industry R&D (mill US$): 1997-2003 US Overseas Pct of US R&D expenditures Total US MNC (A) (B) (C) (D) (E) U.S. Industry R&D or BERD (NSF) Majorityowned US affiliates of foreign companies Majority owned foreign affiliates of US MNCs US affiliates of foreign companies (50%) MNCs multinational companies. Data Sources: NSF Survey of Industry R&D (SIRD); BEA FDI surveys. Share of overseas affiliates Foreign affiliates of US MNCs (50%) (B) + (D) (D)/(E) U.S.-MNC parents U.S.-MNC parents 1997 157,539 106,800 17,216 14,593 67.8 10.9 9.3 121,393 12.0 1998 169,180 113,777 22,375 14,664 67.3 13.2 8.7 128,441 11.4 1999 184,129 126,291 24,027 18,144 68.6 13.0 9.9 144,435 12.6 2000 201,962 135,467 26,180 20,457 67.1 13.0 10.1 155,924 13.1 2001 202,017 143,017 26,463 19,702 70.8 13.1 9.8 162,719 12.1 2002 193,868 136,977 27,507 21,063 70.7 14.2 10.9 158,040 13.3 2003 204,004 140,103 29,524 22,328 68.7 14.5 10.9 162,431 13.7 26
RDT Services Trade: Affiliated vs. Unaffiliated (bill US$): 2001-2004 Unaffiliated Affiliated Exports 2001 6.7 1.0 5.7 2002 7.6 1.1 6.5 2003 8.8 1.2 7.6 2004 9.8 1.3 8.5 Imports 2001 2.4 0.7 1.7 2002 2.6 1.0 1.6 2003 4.4 1.3 3.1 2004 4.7 1.8 2.9 T rade balance 2001 4.3 0.3 4.0 2002 5.0 0.1 4.9 2003 4.3-0.2 4.5 2004 5.1-0.5 5.6 RDT Research, development, and testing services. Source: BEA, U.S. International Services: Cross-border Trade. 27
RDT Services Affiliated Trade: U.S. and foreign MNCs (bill US$): 2001-2004 Exports Within US MNCs From U.S. parents to their foreign affiliates: Within foreign MNCs From U.S. affiliates of foreign MNCs to their foreign parents:* 2001 5.7 2.2 3.5 2002 6.5 1.9 4.6 2003 7.6 2.0 5.6 2004 8.5 1.8 6.7 Imports From foreign affiliates of US MNCs to their US parents From foreign MNC parents to their US affiliates* 2001 1.7 0.6 1.1 2002 1.6 0.8 0.8 2003 3.1 1.1 2.0 2004 2.9 1.2 1.8 Trade balance 2001 4.0 1.5 2.4 2002 4.9 1.2 3.7 2003 4.5 0.9 3.6 2004 5.6 0.6 5.0 * U.S. affiliate's transactions within foreign MNCs also include transactions with other foreign members of the MNC. Source: BEA, U.S. International Services: Cross-border Trade. 28
RDT Services Exports vs. R&D performance (bill US$): 2001-03 R&D performance RDT exports percent All companies located in U.S. All companies located in U.S. R&D performance RDT exports percent From foreign affiliates of US MOFAs MNCs to their US parents* 2001 202.0 6.7 3.3 19.7 0.6 3.2 2002 193.9 7.6 3.9 21.1 0.8 3.6 2003 204.0 8.8 4.3 22.3 1.1 4.8 U.S.-MNC parents From U.S. parents to their foreign affiliates: MOUSAs From U.S. affiliates of foreign MNCs to their foreign parents:** 2001 143.0 2.2 1.5 26.5 3.5 13.2 2002 137.0 1.9 1.4 27.5 4.6 16.6 2003 140.1 2.0 1.4 29.5 5.6 19.0 * This is equal to imports of U.S. MNC-parents. ** Data include transactions with other foreign members of the MNC. MOUSA Majority-owned US affiliates of foreign MNCs; MOFA Majority owned foreign affiliates of US MNCs; RDT Research, development, and testing services. Data sources: NSF SIRD and BEA U.S. International Services. 29