Advancing Measures on Innovation PPT Francisco Moris

Division of Science Resources Statistics

Division of Science Resources StatisticsNational Science Foundation

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Advancing Innovation-Related Metrics:Globalization and Capitalizing Intangibles

Francisco MorisGeorgia Tech International Workshop on

New Directions for Innovation MeasurementMay 13, 2008

National Science FoundationDivision of Science Resources Statistics

www.nsf.gov/[email protected] 703-292-4678

NOTE: The views expressed here are those of the author and do not necessarily reflect NSF views.



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Overview• Selected policy analysis needs• OECD Task Force, SNA & other international

statistical manuals• Special focus

Measuring int’l trade in R&DMultinational companies (MNCs) activities

• Data development strategies



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Policy analysis needs onglobalization and innovation

• Geographical dimensions of innovation: FDI and outsourcing; clusters; regions

• Organizational aspects of innovation: open innovation; management of innovation; international transactions

• Links between innovation and performanceRole of R&D and other intangibles in GDP and other socio-economic impact measuresReturns on publicly-funded R&D

• Impact of globalization in the national accounts



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Int’l Statistical Manuals andTask 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



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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 SAData releases so far: Sept 2006 and 2007Ongoing methodological research: industry-level data and international flowsLong-term plans: incorporation of R&D into the core NIPA accounts in 2013



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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



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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)



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International Trade in R&D

• Global and collaborative R&D; outsourcing and FDI

• Increased S&T capabilities in emerging countries

• Increased tradability of servicesImply increased int’l knowledge flows earlier in the innovation process



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International trade in R&D within MNCs(3-way intersection): brings together separate

statistical areas, standards, and challenges



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OECD Task forceR&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 revisionR&D, National accounts, Balance of Payments staff



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Definition and characterizationof 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).



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Data sources on R&D exports/imports• Balance of Payments data

Direct/bank reporting systemsSurvey 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&Asinvolving R&D-performing companies; CB capital transfers



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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)



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Figure 3. Relationship among indicators on business R&D trade

BERD

BPT or Other Business Services

FM-based RD surveys

Trade in Private Services

Extramural R&D Expenditures (EE)

by Business Enterprises (BE)

FABE from overseas business

SNA-BMP-MSITS-based int’l transaction surveys

Funding from abroad for BE (FABE)

EEABE funds sent to overseas businesses

of which:to affiliated and

unaffiliated business

of which:from affiliated and

unaffiliated business

Imports: of which from affiliated and unaffiliated businesses

Exports: of which to affiliated and unaffiliated businessesEquivalent

indicators (except as noted in the text)

R&D services

Extramural expenditures sent to

abroad by BE (EEABE)



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Table 3. Availability of Indicators onR&D Exports and Imports (OECD data)



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• 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

Measuring international trade in R&D



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Norway: RDT exports vs. FABEand RDT imports vs. EEABE, million NOK

0

500

1,000

1,500

2,000

2,500

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

RDT-Exp FABE

0

200

400

600

800

1,000

1,200

1,400

1,600

1,800

2,000

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

RDT-Imp EEABE

Funding from Abroad for BE (FABE); Extramural expenditures to abroad by BE (EEABE)RDT Research, development, and testing servicesNOK 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.



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Norway: RDT vs. R&D funding/EE balance, million NOK

-1200

-1000

-800

-600

-400

-200

0

200

400

600

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

RDT balance Funding balance



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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



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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.



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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



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Scope: U.S. & foreign MNCsData: sales, employment, R&DOther operations data:

•Property, plant, equipment•Balance sheets and income statements•Gross product•Royalties and license fees

BEA Surveys: Foreign Direct Investment in the U.S. and

U.S. Direct Investment Abroad

COMBINED DATASET with NEW DETAIL

Scope: For-profit R&D performers located in U.S.Data: sales, employment, R&DR&D details:

• Basic, applied, development• Distribution by state• Type of cost, technology• Contracted out • Foreign ownership

Globalization of R&D: FDI Link What do we want to know

NSF/CensusIndustry R&D Survey

EINs



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NSF Science of Science and Innovation Policy (SciSIP)

• GoalsUnderstanding: develop theories and modelsMeasurement: improve and expand science metricsCommunity of practice

• Grand challengesFull systems approach – models, tools, and data on science, technology, and innovationEvaluative measures; spilloversDecision-making toolsAccounting of int’l flows in intangible assets and workforce



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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, [email protected]://www.nsf.gov/sbe



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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 linkingTraining and other human capital indicatorsIntangibles & business/financial accounting



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The Role of MNCs in U.S. Industry R&D(mill US$): 1997-2003

MNCs multinational companies.Data Sources: NSF Survey of Industry R&D (SIRD); BEA FDI surveys.

US OverseasTotal US MNC

Share of overseas affiliates

(A) (B) (C) (D) (E)

U.S. Industry R&D or BERD (NSF)

U.S.-MNC parents

Majority-owned US affiliates of

foreign companies

Majority owned foreign

affiliates of US MNCs

U.S.-MNC parents

US affiliates of foreign companies

(50%)

Foreign affiliates of US MNCs

(50%) (B) + (D) (D)/(E)1997 157,539 106,800 17,216 14,593 67.8 10.9 9.3 121,393 12.01998 169,180 113,777 22,375 14,664 67.3 13.2 8.7 128,441 11.41999 184,129 126,291 24,027 18,144 68.6 13.0 9.9 144,435 12.62000 201,962 135,467 26,180 20,457 67.1 13.0 10.1 155,924 13.12001 202,017 143,017 26,463 19,702 70.8 13.1 9.8 162,719 12.12002 193,868 136,977 27,507 21,063 70.7 14.2 10.9 158,040 13.32003 204,004 140,103 29,524 22,328 68.7 14.5 10.9 162,431 13.7

Pct of US R&D expenditures



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RDT Services Trade: Affiliated vs. Unaffiliated (bill US$): 2001-2004

RDT – Research, development, and testing services. Source: BEA, U.S. International Services: Cross-border Trade.

Unaffiliated AffiliatedExports

2001 6.7 1.0 5.72002 7.6 1.1 6.52003 8.8 1.2 7.62004 9.8 1.3 8.5

Imports2001 2.4 0.7 1.72002 2.6 1.0 1.62003 4.4 1.3 3.12004 4.7 1.8 2.9

Trade balance2001 4.3 0.3 4.02002 5.0 0.1 4.92003 4.3 -0.2 4.52004 5.1 -0.5 5.6



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RDT Services Affiliated Trade: U.S. and foreign MNCs (bill US$): 2001-2004

* 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.

Within US MNCs Within foreign MNCs

Exports

From U.S. parents to their foreign affiliates:

From U.S. affiliates of foreign MNCs to their

foreign parents:*2001 5.7 2.2 3.52002 6.5 1.9 4.62003 7.6 2.0 5.62004 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 1.12002 1.6 0.8 0.82003 3.1 1.1 2.02004 2.9 1.2 1.8

Trade balance2001 4.0 1.5 2.42002 4.9 1.2 3.72003 4.5 0.9 3.62004 5.6 0.6 5.0



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RDT Services Exports vs. R&D performance (bill US$): 2001-03

* 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.

R&D performance RDT exports percent

R&D performance RDT exports percent

All companies located in U.S.

All companies located in U.S. MOFAs

From foreign affiliates of US

MNCs to their US parents*

2001 202.0 6.7 3.3 19.7 0.6 3.22002 193.9 7.6 3.9 21.1 0.8 3.62003 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 13.22002 137.0 1.9 1.4 27.5 4.6 16.62003 140.1 2.0 1.4 29.5 5.6 19.0

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Advancing Measures on Innovation PPT Francisco Moris