Andrew Wyckoff, OECD ITIF Innovation Forum Washington, DC 21 July 2010

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1 OECD s Innovation Strategy: Getting a Head Start on Tomorrow Andrew Wyckoff, OECD ITIF Innovation Forum Washington, DC 21 July

2 Overview What is OECD s Innovation Strategy? What are some of the implications? 2

3 What is OECD s Innovation Strategy? 3

4 A horizontal approach Cutting across policy areas Environment Education & skills Science and technology Industry and entrepreneurship Development Tax Competition Investment Exploring innovation from a wide range of policy perspectives Information and communications Statistics Public governance Trade Consumer policy Territorial development 4

5 A series of products A short Ministerial paper setting out the challenges and priorities for action on innovation, combined with a set of policy principles An analytical report, providing evidence on the main innovation drivers and processes and policy recommendations A compendium of policy-relevant indicators that will enable countries to benchmark themselves on a range of policies and measurements In-depth thematic reports on key issues The beginnings of a policy handbook, that will enable countries to examine their own performance and system, and provide tools and examples to take action. 5

6 What are some of the implications? 6

7 1. Innovation today involves the interaction of a system: R&D is only one element 7

8 R&D is critical to innovation... % Gross domestic expenditure on R&D, As a percentage of GDP Japan OECD EU27 China United States Source: OECD (2009), Main Science and Technology Indicators 2009/2, December. 8

9 ...and is the main focus of public support. % Direct government Direct government funding of funding BERD of BERDIndirect government support through R&D tax incentives Total government support (direct + indirect) to business R&D, % GDP United Korea United States (2008) States (2008) (2008) Canada France (2008) France (2008) (2008) France Korea (2008) Korea (2008) (2008) United States Czech (2008) Czech Republic Republic Belgium Spain Spain Austria Sweden Sweden Czech Republic Austria Austria Japan Finland Finland Norway Norway Spain (2008) (2008) United Kingdom (2008) Germany Germany United United Kingdom Kingdom Ireland (2008) (2008) Iceland Hungary Iceland (2008) (2008) Norway (2008) Belgium Belgium Luxembourg Sweden Luxembourg Denmark Denmark (2008) (2008) (2008) Netherlands Hungary Hungary Australia Australia (2006) (2006) (2006) Finland Ireland Ireland New Portugal New Zealand Zealand Germany Italy Italy Switzerland Iceland Switzerland (2008) (2008) (2008) Luxembourg Japan Japan New Zealand Turkey Turkey Slovak Slovak Republic Republic Italy (2008) (2008) Switzerland Netherlands Netherlands (2008) Canada Canada Turkey (2008) (2008) Slovak Republic (2008) Portugal Portugal Poland Poland Poland Mexico Mexico Mexico Greece Greece Greece (2005) (2005) (2005) Source: OECD (2010), Measuring Innovation: A New Perspective, OECD, Paris based on NESTI 2009 R&D tax incentives questionnaire. 9

10 But innovation is more than R&D. New-to-market product innovators, As a percentage of innovative firms by R&D status % Innovative firms without R&D Innovative firms with in-house R&D 0 Austria Czech Republic Iceland ( ) Luxembourg Ireland Sweden Netherlands Estonia Chile Canada ( , manufacturing) Norway Belgium Mexico ( ) Denmark Italy Japan ( ) South Africa ( ) Spain Australia ( ) Portugal United Kingdom Korea ( , manufacturing) Source: OECD (2010), Measuring Innovation: A New Perspective, OECD, Paris based on OECD, Innovation microdata project. 10

11 Firms collaborate with each other. % 60 Firms with national/international collaboration on innovation, As a percentage of innovative firms National collaboration only International collaboration Finland Chile Sweden Czech Republic Netherlands Austria South Africa ( ) Belgium Norway Estonia Denmark Luxembourg New Zealand ( ) Iceland ( ) United Kingdom Ireland Japan ( ) Canada ( , manufacturing) China Australia ( ) Korea ( , manufacturing) Portugal Spain Germany Italy Source: OECD (2010), Measuring Innovation: A New Perspective, OECD, Paris based on OECD, Innovation microdata project.

12 Innovation is multidisciplinary. Scientific publications cited by green patents Chemical Engineering Chemistry Material Science Physics Legend: 14.2% 17.4% 9.5% 10.5% Patents Engineering 10.6% Green Technology 4.9% Energy Patent-science link via citations (100% = all citations) 4.8% 6.6% 3.7% 5.7% 7.5% Scientific Papers Immunology and Microbiology Biochemistry, Genetics and Molecular Biology Agricultural and Biological Sciences Earth and Planetary Sciences Source: OECD (2010), Measuring Innovation: A New Perspective, OECD, Paris. Environmental Science 12 12

13 Policy Implications for a more collaborative mode of innovation Erect bridges between the different parts, forming or joining a network not necessarily more or new hard infrastructure. Building networks through labour mobility. Use of ICT to build networks; informatics as a multidisciplinary field and public depositories of information as a platform for innovation; Developing knowledge networks and markets; 13

14 Finding 2: The mix of actors is changing. Need to broaden our perspective from: Multinational Enterprises Public research organisations & universities the G7. 14

15 New firms are very important to innovation... Patenting activity of young ( <5 years) firms, PCT patent filings by young firms as a percentage of filings by firms in each country % Share of countries in PCT filed by firms (%) Share of patents filed by firms under 5 years old United States Germany France Netherlands United Kingdom Sweden Finland Italy Denmark Belgium Austria Spain Norway Source: OECD (2010), Measuring Innovation: A New Perspective, OECD, Paris. Note : Data refers to patent applications filed under the Patent Co-operation Treaty (PCT) with a priority in Patent counts are based on the country of residence of the applicants. The share of young firms is derived from the set of patent applicants successfully matched with business register data. 15

16 ...and job creation. Contribution of business start-ups to overall employment and the net employment growth (US, ) Percent Share of Employment Share of Net Growth Source: Who Creates Jobs? Small vs. Large vs. Young (Haltiwanger, Jarmin and Miranda, February 2010). 16

17 Innovation is not flat... Patents per million inhabitants, average Source: OECD (2010), Measuring Innovation: A New Perspective, OECD, Paris. 17

18 ...it is spiky. R&D per GDP, / / / / / / 2 R&D intensity / Share of national total Source: OECD (2010), Regional Database July

19 New players are emerging, spreading innovative capabilities... Scientific collaboration with BRIC countries, 1998 and 2008 As a percentage of total international co-authored articles % North America Europe Far East & Oceania (excluding China) China Source: OECD (2010), Measuring Innovation: A New Perspective, OECD, Paris based on Scopus Custom Data, Elsevier, December Notes: Only countries with more than 500 publications, and/or EU27 and OECD countries are tabulated. North America: the United States, Canada and Mexico. Europe: Austria, Belgium, Bulgaria, Belarus, Switzerland, Cyprus, the Czech Republic, Germany, Denmark, Estonia, Spain, Finland, France, the United Kingdom, Greece, Croatia, Hungary, Ireland, Iceland, Italy, Lithuania, Luxembourg, Latvia, Malta, the Netherlands, Norway, Poland, Portugal, Romania, Sweden, Slovenia, the Slovak Republic and Ukraine. 19 Far East & Oceania: Australia, Indonesia, Japan, Korea, Malaysia, New Zealand, Singapore, and Thailand.

20 ...that alter the topography of innovation. Broad based Leaders Narrow Leaders / Adopters Adopters / Followers time elapse at

21 Policy Implications of global networks of innovation Build absorptive capacity: skills, institutions, access to networks; Importance of services as a means of capturing value locally & gaining access to lead-users; Universities are an essential node in innovation systems that can be the glue between actors, a local anchor into global networks and a magnet for global talent. Building on existing strengths for dynamic comparative advantage through innovation. 21

22 Finding 3. Innovation is already a fundamental economic investment... Investment in fixed and intangible assets as a share of GDP, 2006 % Machinery and equipment Software and databases R&D and other intellectual property products Brand equity, firm specific human capital, organisational capital Slovak Republic Italy Czech Republic Japan (2005) Australia Spain Canada (2005) Portugal (2005) Austria Sweden France Denmark Germany Finland United States United Kingdom Source: OECD (2010), Measuring Innovation: A New Perspective, OECD, Paris based on COINVEST [ and research papers,

23 ...and a driver of growth. Innovation accounts for a large share of Labour Productivity growth Percentage contributions, (or nearest available period) % Contribution from intangible capital Contribution from tangible capital Labour productivity growth Source: OECD, based on research papers. 23

24 21 st Century Innovation: the ipod The Apple ipod = 299$ of Chinese exports to US Distribution of the value added 299 US$ 75$ profit to US (Apple) 73$ whls/retail US (Apple) 75$ to Japan (Toshiba) 60$ 400 parts from Asia 15$ 16 parts from the US 2$ assembly by China itunes Music Store (2003) 70% digital market share Big 5 recording companies 24

25 Policy Implications of Innovation as a key determinant of economic growth Now, more than ever : continue to support longterm investments in innovation (basic R&D); Not an on / off incremental investment, but accumulative Cutting spending could limit growth and the ability to address global challenges Not all policies require large public investment Reform and streamline existing policies; remove barriers; Use demand-side measures (procurement, standards); Inject innovation into the public sector (e-gov). Better understand the broader role of innovation and its impact on economic growth 25

26 Conclusion: Develop a Strategy for Innovation A horizontal approach: Leadership & long-term vision; Co-ordination via the budget; Seek coherence: young small; Division of labour with regions: build on indigenous strengths; seek a critical mass. Evaluate & monitor through improved measures (measurement agenda); Better measures to reflect the central role of Innovation to the economy 26

27 Implications for the US The US Innovation system is the envy of the world but it is the wrong time to be complacent; The jewel in the crown US Universities are under tremendous pressure; Need to develop the ability to absorb good ideas developed abroad as a complement to indigenous development. Inevitably US advantages are being reduced: scale (C&I); entrepreneurship; ICT. 27

28 28

29 For more information Go to the web: Contact me: 29

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