Human Capital and the Costs of Non-Research

Alfonso Gambardella

Sant’Anna School of Advanced Studies

Pisa, Italy

Research policy - Incentives and Institutions

Ministry of Finance & Economics

Rome November 28, 2002

Topics

• Five stylised facts about research and innovation in the 1990s

• Some intriguing indicators about Europe and Italy

• Conclusions

Fact 1: Increase in Patent Applications

• US applications from 80k per year in the 1980s to 140-150k in the 1990s

• EPO: 143k applications in 2000. Up 16% from previous year. Annual filings more than doubled compared to 10 yrs ago.

• There is increase in the propensity to patent (e.g semiconductors). Yet, notable increase in innovations as well.

Fact 2: Markets for Technology

• Notable increase in technology transactions in the 1990s (patents, technologies, ideas)

• Implication: Innovators develop their technologies even if they don’t have mfr or mkt assets

• The market is there:

– EPO estimated that in Europe 20 billion $ are spent every year to develop innovations already developed elsewhere

– Studies show that many companies (or patent holders) are willing to license their patents

Fact 3: Human capital externalities

“Using detailed data on California biotechnology, we find that … for an average firm, five articles co-authored by academic stars and the firm’s scientists imply about 5 more products in development, … and 860 more employees.” (Zucker, Darby, Armstrong, 1998)

Fact 4: New industry & business models

• Information technology (and Silicon Valley) have shown how to create development via high-skill intensive business, new models of firms and of economic relationships, markets for technology, etc..

• This has potentials for development as well (e.g. Bangalore, Ireland, Israel)

Fact 5: Openness

• Openness of science has been a major example of the impact of openness of performance in research and related activities (e.g. Paul David’s work)

• A recent study shows that more “open” European regions have higher labour productivity, other things being equal.

To sum up …

• “People” are increasingly central to the overall research and innovation business

• People are crucial to … – invent– manage– develop markets, institutions, and firms– create domestic and int’l networks– take strategic decisions and entrepreneurial actions

(whether in research or business)– etc..

Some intriguing indicators(just released EU Key S&T figures 2002)

• Show that European countries are enhancing the role of “people” (HK)

• Italy is lagging behind. In particular: – Italy has a good innovation and research

productivity;– But the key inputs (number of researchers, scale

of HK) is dramatically modest– Needs to increase the size of the HK base

0

10

20

30

40

50

60

70

80

90

US

A

Uni

ted

Kin

gdo

m

Aus

tria

Ne

the

rland

s

Sw

ede

n

De

nma

rk

Be

lgiu

m

Ire

land

Ita

ly

Ge

rma

ny

Fra

nce

Spa

in

Fin

land

Gre

ece

Japa

n

Po

rtug

al

Source: My calculations on EU Key S&T Figures 2002

Scientific Publications per 1000 Researchers in Govt or Academia

0

10

20

30

40

50

60

US

A

Ne

the

rland

s

Uni

ted

Kin

gd

om

Sw

ed

en

De

nma

rk

Irela

nd

Be

lgiu

m

Aus

tria

Ge

rma

ny

Italy

Fra

nce

Fin

land

Sp

ain

Jap

an

Gre

ece

Po

rtug

al

Source: My calculations on EU Key S&T Figures 2002

Highly Cited Publications per 1000 Researchers in Govt or Academia

0

20

40

60

80

100

120

140

160

Ne

the

rland

s

Ge

rman

y

Ital

y

Fin

land

Sw

ed

en

De

nmar

k

Fra

nce

Aus

tria

Be

lgiu

m

Uni

ted

Kin

gd

om

Sp

ain

Ire

land

US

A

Jap

an

Gre

ece

Po

rtug

al

Source: My calculations on EU Key S&T Figures 2002

EPO Patents 2000 per 1000 Researchers in Business Firms

0

2

4

6

8

10

12

14

Fin

land

Jap

an

Sw

ed

en

US

A

Be

lgiu

m

De

nmar

k

Ge

rman

y

Fra

nce

Uni

ted

Kin

gd

om

EU

-15

Ne

the

rland

s

Ire

land

Aus

tria

Sp

ain

Po

rtug

al

Gre

ece

Ital

y

Source: EU Key S&T Figures 2002

Researchers (FTE) per 1000 labour force: Latest available year

-2

0

2

4

6

8

10

12

Gre

ece

Fin

land

Ire

land

Sp

ain

Po

rtug

al

Be

lgiu

m

US

A

Ne

the

rland

s

Sw

ed

en

De

nmar

k

EU

-15

Uni

ted

Kin

gd

om

Jap

an

Ge

rman

y

Fra

nce

Ital

y

Source: EU Key S&T Figures 2002

Researchers (FTE) per 1000 labour force: Annual growth from 1995 to the latest available year

0

5000

10000

15000

20000

25000

Germany France Italy Netherlands United Kingdom

EPO Patents 2000 and Researchers in Business Firms: D, F, I, NL, UK

Patents Researchers in Firms

0

0.2

0.4

0.6

0.8

1

1.2

1.4

Sw

ed

en

Fin

land

Ge

rman

y

Fra

nce

Uni

ted

Kin

gd

om

Be

lgiu

m

Aus

tria

EU

-15

Ire

land

De

nmar

k

US

A

Sp

ain

Ne

the

rland

s

Po

rtug

al

Jap

an

Gre

ece

Ital

y

Source: EU Key S&T Figures 2002

New S&T PhDs per 1000 population aged 25-34, latest available year

0

0.5

1

1.5

2

2.5

US

A

Fin

land

Sw

ed

en

De

nmar

k

Aus

tria

Ire

land

Gre

ece

Ne

the

rland

s

Fra

nce

Sp

ain

Uni

ted

Kin

gd

om

EU

-15

Ge

rman

y

Po

rtug

al

Jap

an

Be

lgiu

m

Ital

y

Source: EU Key S&T Figures 2002

Private & public expenditures on tertiary education, % of GDP in 1998

To sum up ...

• European countries with low share of HK are trying to catch up

• Italy is an exception: – Low supply of HK, in spite of the fact that

because of high productivity this is a valuable investment to make!

– The logic is straightforward: Few PhDs, along with modest expenditures on tertiary edu few researchers/HK small research output (patents or publications)

Conclusions

What are the costs of a low supply of HK?

“Using detailed data on California biotechnology, we find that … for an average firm, five articles co-authored by academic stars and the firm’s scientists imply about 5 more products in development, … and 860 more employees.” (Zucker, Darby, Armstrong, 1998)

What then? Increase the supply of PhDs!

• Develop high quality Doctoral Programmes to:– Implement a sound basis of research and HK– Provide the teachers for the other levels of tertiary

education

• They could follow either a one-to-one, apprentship-like “industrial PhD” approach (e.g. in engineering); or an anglosaxon-like PhD (with courses, etc.)

Supply of PhDs!

Most importantly, PhD programmes should be managed by reputed researchers who have experience with leading int’l PhD programmes (and research), possibly within independent or semi-independent institutions Create the “Graduate Schools”

“What are the research university?….

…. Those with a graduate programme.”