Intangible capital (WS8)

Report
Intangible Capital
Marianne Saam
Centre for European Economic Research (ZEW)
e-Frame Final Conference
10 February 2014
The e-Frame project is funded by the 7th EU Framework Programme,
Theme 8 Socio-Economic Sciences and Humanities, Grant Agreement No.
290 520.
GDP and Beyond: Measurement, Policy Use and Moving Forward
 GDP is currently augmented by R&D investment
 Beyond are other intangible assets not yet capitalised in national
accounts
 Measurement remains challenging, for example for services lives
 Policy Use is much wanted (``smart growth‘‘) but for example
industry-level data is still experimental
 Moving Forward? Yes, a lot is being done out of FP7 projects, at
the OECD, at NSIs, in national and transnational initiatives….
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Agenda
1. Measuring Intangible Assets: What is it and who measures it?
2. The Corrado-Hulten-Sichel Framework
3. Integration into National Accounts
4. Firm-level Measurement
5. Policy-Relevant Use
6. Outlook
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1. What is Intangible Capital?
 „Knowledge-based assets (…) create future benefits for
firms, but, unlike machines (…) they are not physical.“
(OECD, 2013)
 „Intangible assets are non-physical sources of value
(claims to future benefits) generated by innovation
(discovery), unique organizational designs, or human
resource practices“
(Lev, 2001)
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1. Who Wants to Measure Intangible Capital?
Statistical Agencies/Public Institutions
Policy
Financial
markets
Performance
Intangibles
Media,
society
Tangibles
Academic Researchers
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Labour
Firms
5
2. The Framework by Corrado, Hulten and Sichel

Corrado, Hulten and Sichel (2005, 2009 – CHS)
• Framework to measure intangible investment in a way compatible with
national accounts
• ….and consistent with the economic theory of investment
 Measurement of fraction of an identifiable data series on
intangible spending that is investment
• Expenditure on own-account or purchased knowledge assets
• Wages paid for working time spent on creation of knowledge assets
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2. Data Using Framework by Corrado, Hulten and Sichel

INTAN-Invest database: Corrado, Haskel, Jona-Lasinio and
Iommi (2012) published data on intangible investment of the
market economy (plus sector O) for EU countries for the period
1995-2007
 Freely available at www.intan-invest.net
 Joint initiative of the FP7 SSH Projects COINVEST and INNODRIVE
and The Conference Board, supported by the EC (2013)
 First industry breakdown of INTAN-Invest data (NACE rev. 1.1) to
industry-level in FP7 SSH project INDICSER
 INTAN-Invest meanwhile available in NACE rev.2
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2. CHS: Country-level Results from INTAN-Invest
GDP shares of tangible vs. intangible investment, 1995–2009 (average values)
Source: Corrado et al. (2013), Oxford Review of Economic Policy
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3. Integration into National Accounts?
1. Computer software and databases
2. Innovative property
i.
ii.
iii.
iv.
R&D (incl. in financial industry)
new
Mineral explorations and evaluation
Entertainment, literary and artistic originals
Design
SNA 2008-ESA 2010
Fixed asset boundary
3. Economic competencies
i.
ii.
iii.
Brand equity (advertising and market research) SNA 2008-ESA 2010
Organisational capital
Non-produced assets
Firm-specific human capital (training)
(counted if transaction)
Based on Iommi (2013), presentation at e-Frame workshop in intangibles
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3. Integration into National Accounts?
 Trade-off between completeness and accuracy of coverage of intangible assets
 GDP has to be measure that is trusted , comparable across countries and time
 From this perspective, conservatism with regard to changing GDP seems
an almost necessary virtue
 On the other hand, in the long term GDP has to keep up with new insights in
the quantification of assets
 „Knowledge economy“ ever more important in policy debate
 Intangible assets core target in EU 2020: 3% of GDP in R&D
 The debate about expanding the asset boundary should continue
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3. Integration into National Accounts?
Comments from e-Frame Workshop
 Too early to extend asset boundary of NAs beyond R&D
 Conditions for possible extension in the future
• Framework by CHS adapted for practical implementation at NSIs
• Internationally comparable surveys prior to potential implementation
• More knowledge about short-run properties of intangible investment
 However, including only R&D may bias measurement of intangibles
towards manufacturing
 Mix of surveying and modelling may be needed (burden on firms)
 Treatment of human capital in national accounts also seen as needing
improvement
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4. Firm-level Measurement
 ONS/NESTA survey collects information from more than 1000
firms on expenditures on six categories of intangible assets and
on service lives (Field/Franklin 2012)
 Goal:
•
•
•
•
Provide evidence on intangible investment beyond R&D
Collect data on own-account vs. purchased intangibles
Complement other surveys on intangibles
Find out whether firms can answer questions about service lives of
intangibles and about ownership of R&D assets
 Sample is small compared to other ONS surveys, R&D
expenditure looks lower than in other surveys
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4. Firm-level Measurement
 Firms themselves may have an interest or obligation to measure
intangible capital (see Guenther, 2013, presentation at OECD)
• To asses their contribution to firm performance
• To comply to accounting rules
• To communicate their investments to capital markets and policy
 Critical points of accounting for intangibles
•
•
•
•
Level of financial information on intangibles in financial reporting is low
Large room for managerial discretion in the reporting on intangibles
Low voluntary disclosure of investment in intangibles
Intangibles data are not used much in management control, little
validation
Source: Guenther (2013), presentation at OECD
•
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5. Policy-Relevant Use: Intangibles as Part of GDP
“R&D expenditure is recorded as
GFCF and no longer as current
expenditure. This will increase EU
GDP by around 1.9%. (...) very
important in the context of the
Europe 2020 strategy.”
(European Commission, 16.1.14)
“In the short term America’s
new GDP measure makes
international comparisons
more difficult.”
(Economist, 3.8.2013)
“GDP – New Statistics Let Debt
Ratio Decline”
(FAZ, Germany, 21.1.14)
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5. Policy-Relevant Use: Intangibles as Driver of GDP
Conclusions from OECD project
 Supply-side programs should support intangible investment in areas of highest
social return
 Intellectual property rights need further development
 Intangible assets are an important factor in global value chain
 Securitisation of debt using intangible assets could be improved to address
shortfalls of early-stage risk capital
 Many of the world‘s most successful companies‘ value resides almost entirely
in their knowledge-based assets, but corporate financial reports provide
limited information
 Policies need to address the economic potential of „big data“
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6. Outlook
 Intangible investment: both technological and non-technological innovation
 Long-term: little reason not to account for intangible investment in GDP
 Medium term: academic projects, experimental surveys and satellite accounts
will move agenda forward
 Major measurement issues on service lifes, rates of return and sectoral
heterogeneity are not solved
 Common language to be found between academics, public institutions,
statisticians at NSIs and firms
 Existing surveys on innovation and training with a more „micro“ approach
continue to be important source of evidence
 Data construction for the public sector has just started (SPINTAN)
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Further Reading
Corrado, C., J. Haskel, C. Jona-Lasinio, M. Iommi (2013), Innovation
and intangible investment in Europe, Japan and the United
States, Oxford Review of Economic Policy, 29(2),261-268.
OECD (2013), New Sources of Growth: Knowledge-Based Capital –
Key Analyses and Policy Conclusions – Synthesis Report.
European Commission (2013), Joint database on intangibles for
European policymaking - Data from Innodrive, Coinvest and The
Conference Board – A policy-science dialogoe, DG for Research
and Innovation – Socio-Economic Sciences and Humanities.
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Back up I: Communicating intangibles to the public
Are we persuaded that intangible assets exist?
• A machine may be valuable, obsolete or broken, but I can in principle
determine by commonly agreed criteria whether it exists
• The existence of a patent or a piece of software is also quite straightward
to communicate
• Creating assets through training, consulting, marketing or managerial
effort may be much more risky
• Society more sceptical about intangible value creation after financial crisis
• …maybe too conventional reasoning. Machines, software or patents may
also be counted while not contributing positively to productivity
•
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Back Up II: Asset List of INTAN-Invest
•
Asset type
Key Source
Computerized information
1. Software
2. Databases
EU KLEMS (investment)
EU KLEMS (investment)
31.5
31.5
Innovative property
3. Mineral exploration
4. R&D (scientific)
5. Entertainment and artistic originals
6. New product/systems in financial services
NA/SUT (investment)
BERD (expenditures)
NA/SUT (investment)
EU KLEMS, WIOD, STAN (labour compensation)
7.5
15
20
20
7. Design and other new product/systems
SBS (turnover)
20
Economic competencies
8. Brand equity
a. Advertising
b. Market research
Zenith Optimedia (turnover)
SBS (turnover)/ ESOMAR (add. source for consistency)
55
55
9. Firm-specific resources
a. Employer-provided training
b. Organizational structure
CVTS (costs of CVT)/LCS(apprentice costs)
SBS (turnover), LFS (# employees)/SES (earnings)
40
40
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Depreciation Rate
19
Back Up III: Growth Accounting
Contributions to the growth of output per hour, 1995–2007
Source: Corrado et al. (2013)
Total capital
deepening
(1)
•
Tangibles
(2)
Intangibles
(3)
Labour
composition
(4)
(5)
MFP
(6)
Austria
2.4
0.8
0.3
0.5
0.2
1.4
Belgium
1.8
0.7
0.2
0.5
0.1
1.0
Denmark
1.4
1.2
0.7
0.5
0.2
–0.1
Finland
3.8
0.9
0.2
0.7
0.2
2.7
France
1.9
1.0
0.4
0.6
0.4
0.5
Germany
1.7
1.0
0.7
0.3
0.0
0.8
Ireland
3.8
1.4
0.8
0.6
0.1
2.2
Italy
0.6
0.7
0.5
0.2
0.2
–0.4
Netherlan
ds
2.3
0.9
0.4
0.5
0.4
1.0
Spain
0.8
1.0
0.7
0.3
0.5
–0.6
Sweden
3.7
1.9
1.1
0.8
0.3
1.5
UK
2.9
1.5
0.8
0.7
0.4
1.1
US
2.8
1.5
0.7
0.8
0.2
1.1
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Back Up IV: Industry-level Results from INDICSER
Share of F&E, design and economic competencies in adjusted VA
average 1995-2007, source data used: EU KLEMS 2009, INTAN-Invest
Source: Niebel, O‘Mahony and Saam (2013)
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Back Up V: Firm-level Measurement UK
Source: Field and Franklin (2012), presented by Daniel Ker (ONS) at the e-Frame workshop on intangibles
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