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Is Manufacturing or Services Most Important for Intangible Investment in Sweden?
Harald Edquist
Project funded by the European Commission under the Seventh Framework Programme
Grant No 217512
Labor and total factor productivity growth in the business sector in EU-15, Japan and the US 1995–2007
Source: EU KLEMS (2009)
-1% 0% 1% 2% 3% 4% 5%
SpainItaly
DenmarkLuxembour
GermanyBelgiumPortugal
FranceNetherlands
AustriaJapan
UKUSA
GreeceSwedenFinlandIreland
TFP LP
Background• Recovery from crisis in the 1990s
• Market reforms in the 1980s
• Information and communication technology (ICT)
• High TFP growth
Corrado, Hulten and Sichel (2006) framework
• Computerized information(software and computerized databases)
• Innovative property(R&D, mineral explorations, copyright and license costs, product development in financial industries and design)
• Economic competencies(brand equity, firm specific human capital and organizational capital)
SourcesIntangible assets SourcesSoftware EU KLEMS
Research and development OECD ANBERD
Mineral exploration SGU
Copyright and license cost Statistics Sweden
Product development in financial industries
EU KLEMS
Design Statistics Sweden
Brand equity IRM, Statistics Sweden
Vocational training Statistics Sweden
Organizational capital Affärsvärlden, Statistics Sweden
Investment in intangibles in the Swedish business sector in 2006 was 292 bn SEK
Source: Edquist (2010)
63
125
104
Software
Innovative property
Economic competencies
Growth accounting for the Swedish business sector 1995–2004
Source: Edquist (2009)
0,3 0,3
1,31,1
0,30,3
1,3
1,8
0,9
0,0
0,5
1,0
1,5
2,0
2,5
3,0
3,5
4,0
4,5
Excluding intangibles Including intangibles
ICT tangible capital Non-ICT tangible capital Labor-quality
Intangible capital TFP
Contribution of intangible capital deepening to LP growth 1995–2004
38%
16%11%
9%
8%
7%
6%3% 1%1%0%
R&D
Design
Vocational training
Purchased OS
Computerized information
Advertisement
Own-account OS
Development costs in financialindustryMarket Research
Copyright and license costs
Mineral exploration
Source: Edquist (2009)
Questions
• Has investment in intangibles been driven by manufacturing or the service sector?
• What is the story in other countries?
Industry level methodIntangible assets SourcesSoftware Sector data available in EU-KLEMS
Research and development Sector data available in ANBERD
Mineral exploration Only investment in mining and quarrying
Copyright and license cost Turnover of industries producing entertainment, literacy and artistic originals
Financial innovation Only investment in financial industry
Design Use tables for purchased design and wage sums in different sectors for own-account design
Brand equity Use tables for advertising and market research
Vocational training Sector data provided by Statistics Sweden
Organizational capital Use tables for purchased OS and wages for managers at the industry level for own-account OS
Investment in intangibles for manufacturing and services in Sweden 2006 (bn SEK)
0
50
100
150
200
250
300
350
Intangible investment Tangible investment
Manufacturing Services
Source: Edquist (2009)
Investment in intangibles for manufacturing and services in Sweden in 2006 (bn SEK)
Source: Own calculations
0 20 40 60 80 100 120 140
Mining and quarrying (ISIC 10-14)
Hotels etc (ISIC 55)
Electricity, gas and water (ISIC 40-41)
Construction (ISIC 45)
Transport, storage and comm. (ISIC 60-64)
Finance and insurance (ISIC 65-67)
Wholesale and retail trade (ISIC 50-52)
Other services (ISIC 70-95)
Manufacturing (ISIC 15-37)
Intangible investment in manufacturing (bn SEK)
Source: Own calculations
0 10 20 30 40 50 60
Textiles etc (17-19)
Wood and other manufacturing (20, 36-37)
Food and beverages (15-16)
Pulp, paper, publishing etc (21-22)
Basic metals and metal products (26-28)
Rubber, petroleum, chmicals etc (23-25)
Transport equipment (34-35)
Machinery and equipment (29-33)
Investment in intangibles for manufacturing and the service sector in the Swedish business sector (bn SEK)
0 10 20 30 40 50 60 70
Mineral Explorations
Copyright and license cost
Financial innovation
Advertising
Vocational training
Brand equity
Design
Organizational structure
Computer Software
R&D
Services
Manufacturing
Source: Own calculations
R&D-investment by firms in 2007 (percent)
Source: Statistics Sweden
Investment in intangibles in four different countries 2000–2005 (percent of GDP)
Source: Clayton et al. (2009); Fukao (2009); van Rooijen-Horsten et al. (2008) and own calculations.
0%
1%
2%
3%
4%
5%
6%
7%
Japan Netherlands Sweden UK
Manufacturing
Services
Conclusions (I)• Total investment in intangibles was 292
bn SEK or 10 percent of GDP in 2006
• Intangibles accounted for 35 percent of the labor productivity growth in the Swedish business sector in 1995–2004
• Sweden was very intensive on R&D investment
Conclusions (II)Manufacturing – 44 percent of intangiblesServices – 51 percent of intangibles
• Manufacturing accounted for 82 percent of private sector investment in R&D, while the service sector invested more in all other categories of intangibles
• Intangible investment was large in Swedish manufacturing compared to other countries, while it was small in services in relative terms
Design (purchased) Turnover AED sectorEmployees with AED occupations
Total employees in AED sectorX=
Design
Design (own account)Design (purchased)
Wage bill of employees with AED occupations in the AED sector
X=Wage bill for employees with design occupations in the rest of the business sector
Purchased
Own Account
Source: Statistics Sweden
AED-occupations based on the Swedish Standard Classification of Occupations (SSYK)
Architects and town planners (SSYK 2141)
Civil engineers (SSYK 2142)
Electrical engineers (SSYK 2143)
Electronics and telecommunication engineers (SSYK 2144)
Mechanical engineers (SSYK 2145)
Chemical engineers (SSYK 2146)
Designers (SSYK 2456)
Decorators and commercial designers (SSYK 3471)
Intangible investment in manufacturing
Source: Own calculations
0 10 20 30 40 50 60
Textiles etc (17-19)
Wood and other manufacturing (20, 36-37)
Food and beverages (15-16)
Pulp, paper, publishing etc (21-22)
Basic metals and metal products (26-28)
Rubber, petroleum, chmicals etc (23-25)
Transport equipment (34-35)
Machinery and equipment (29-33)
Intangible investment
Tangible investment
Intangible investment in manufacturing
Source: Own calculations
0 10 20 30 40 50 60
Textiles etc (17-19)
Wood and other manufacturing (20, 36-37)
Food and beverages (15-16)
Pulp, paper, publishing etc (21-22)
Basic metals and metal products (26-28)
Rubber, petroleum, chmicals etc (23-25)
Transport equipment (34-35)
Machinery and equipment (29-33)
Intangible investment
Tangible investment