In May of 2011, Athena Alliance organized a conference on New Building Blocks for Jobs and Economic Growth: Intangible Assets as Sources of Increased Productivity and Enterprise Value. (For more on the conference, see the New Building Blocks Forum). The conference served as the kick-off of a two year OECD project (see project website). OECD has recently published its interim report on New Sources of Growth: Knowledge-Based Capital Driving Investment and Productivity in the 21st Century.
The first part of the report discusses the importance of intangibles and provides the latest data on investments in intangibles for a number of countries. The data is far more comprehensive and cross-national that what was previously available.
One of the areas included -- which does not get much attention in the U.S. -- is the importance of design:
Beyond the physical appearance of products, design is often integral to all stages of the business process, from basic research to manufacture, marketing and after-sales services. One study in the United Kingdom suggests that design spending might be more than twice as large as business spending on R&D. And design plays important roles in innovation and firm performance. For instance:
• A number of world-beating products owe at least part of their success to different facets of design. Research published in 2010 indicated that the iPhone had then added around USD30bn to the value of the Apple Corporation, with only 25% of this attributable to patentable technology stemming from R&D. Much of the rest arose because of Apple's innovations in design, marketing and management. Companies in traditional industries such as textiles, apparel and furniture are also able to succeed based on design competencies. For instance, Italy has long had a successful furniture industry based largely on small and medium-sized firms with competitive advantages in design.
• 67% of exporters in New Zealand have identified design as central to their commercial success.
• In 2007, almost half of businesses in the United Kingdom believe design contributes to increased market share and turnover. And in 2004, among firms in the United Kingdom that saw design as integral to their business, nearly 70% had introduced a new product or service in the previous three years (compared to just 3% of companies in which design played no role).
The 'Europe 2020 Flagship Initiative - Innovation Union' includes design among its ten identified priorities. And further afield, China, India, Korea and Singapore have all enacted design policies and consider design to have strategic economic importance.
The remainder of the report specifically highlights the importance of a number of policy areas. These include:
• human capital and skills shortages,
• tax incentives for R&D and cross-border tax strategies,
• competition/anti-trust policies in a digital economy with new business models,
• the role of intellectual property rights in the innovation system,
• the importance of entrepreneurship,
• the need to improve corporate reporting of intangibles,
• better measurement and data collection of both macroeconomic and micro-level statistics,
• policies on the use of personal data (to balance privacy and economic value creation) and access to public data, and
• mechanisms to finance innovative, knowledge-based companies.
I will not attempt to summarize all the key points under each of these. Rather I would urge you to read the report for yourself.
However, one point raised that I would like to highlight is the need for a comprehensive look at knowledge-based capital that goes beyond traditional technology policy:
Most OECD governments operate programmes that facilitate business' access to research or technology-related advice and information, often from universities and public research organisations. These schemes - such as innovation vouchers, know-how funds and technical extension services - tend to focus on technological information (typically creating links to academics in science, technology, engineering and mathematics (STEM) disciplines). However, businesses interact with academics for a variety of reasons not restricted to technological development. In the United Kingdom, for instance, nearly a third of all academics from the arts and humanities are engaged with business in some way, as are nearly a half of academics from the creative arts and media. As well as knowledge related to STEM disciplines, businesses also search for assistance with marketing, sales and support services, as well as human resource management, logistics and procurement. Businesses require information and advice relating to many forms of KBC, some of which could be omitted from bridging programmes exclusively focused on STEM disciplines.
The importance of these non-STEM forms of knowledge are often forgotten in our policy debates. Thus I was very pleased to see it specifically addressed in the report.
The report also lays out projects ongoing workplan:
A policy-oriented conference will be held in early 2013, with publications being launched, in a variety of formats, on the following subjects: measurement of KBC and its effects on economic growth; improving tax policy for KBC; the creation of economic value from personal data; corporate reporting of business investment in KBC; knowledge networks and markets; and the role of KBC in global value chains. There will also be an overall project synthesis report and a report to the 2013 OECD Ministerial Council Meeting.
I am looking forward to these reports and activities.
By the way, the 2011 New Building Blocks conference report is now up on the OECD website at as well as on the Athena Alliance website. My own conference observations can be found on the Athena Alliance website.