In yesterday's posting I made reference to a paper by Chuck Hulten, et al. on company investments in intangibles. That paper was written as part of a European research project on Competitiveness, Innovation and Intangible Investment in Europe (COINVEST):
The project aims to understand the contribution of intangible investments to innovation, competitiveness, growth and productivity in Europe. Such a project is vital to help European Union (EU) policy formation and to deepen understanding of some of the most crucial questions facing EU economic policy. The reason is simple. Currently, (almost all) intangible investments are either not measured, or are treated as an intermediate input into production so they are assumed to produce no durable assets for firms or economies. Does this matter? In practice, most knowledge investments involve intangible spending. The Lisbon Agenda aims to make the European Union "the most competitive and dynamic knowledge-driven economy by 2010". Thus, we are in the position of having little data or measurements to back this policy aspiration. This project will set out a method and collect the data required. Some knowledge investment is counted as such in the key economic measures such as GDP (eg software). However, R&D and other knowledge investment (like investment in human capital via training, investment in reputation capital, investment in organisational capital etc.) are all treated as day-to-day expenses, not investment. Thus, under current conventions, investment and GDP in an economy whose businesses spend one euro more on almost all knowledge investment is the same as an economy whose businesses turn up their air-conditioning. Using a team of experts in this field, the project will collect data on a wide range of knowledge investment, at macro and micro levels, incorporate these into macro and micro performance measures and thus greatly improve our understanding of knowledge-driven economies and firms and policy.
The project has produced a number of interesting reports and papers -- mostly on the data issue. The research is wrapping up with a policy briefing in mid-July and a dissemination event in September. I'm looking forward to seeing their final results.
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