OECD Report Indicates Toughening Competition in Knowledge-based Economic Sectors (link)

Paris, 22/10/2003

Full report as "Web book" with links to underlying databases

Despite economic slowdown and talk of the death of the "new economy," the knowledge-intensity of OECD economies continues to increase. This is reflected not only in productivity patterns but also in a wide range of indicators contained in a new OECD publication, OECD Science, Technology and Industry - 2003 Scoreboard.

According to productivity data, the United States, Canada, the Netherlands and Australia received the largest boost from investment in ICT. Much of labour productivity growth outside the farm sector, meanwhile, is concentrated in knowledge intensive activities, notably ICT services and high technology and medium high technology manufacturing.

Significantly, the focus on generating and using knowledge through investments in R&D, use of ICT, patenting, development of scientists and engineers is extending to a wider range of countries - many of them outside the OECD's membership. This suggests increasing competition for the factors that generate knowledge - skilled people, innovative businesses and capital - with a likely reduction in some of the advantages that select countries enjoyed in the 1990s.

The OECD Scoreboard reveals this changing landscape through over 200 indicators on science, technology and industry covering four areas: the creation and diffusion of knowledge, the information economy, the global integration of economic activities and productivity and economic structure. Together, they provide a comprehensive overview for each of the countries surveyed.

The creation and diffusion of knowledge. The report shows that OECD-wide investment in research and development (R&D) rose in 2001 and into 2002, while patenting nearly doubled over the decade fuelled by activity in the biotechnology and information and communication technology (ICT) sectors. This activity is not the sole province of the OECD countries. Major non OECD economies currently account for 17% of global R&D expenditure, with Chinese R&D expenditure of some US $60 billion, putting China third in the world behind the U.S. and Japan. India spent about US $19 billion on R&D in 2000-01, putting it among the top 10 countries world-wide. Chinese Taipei was the fourth largest recipient of U.S. patents, ahead of France, the UK, Korea and Canada.

Human capital is an essential input into economic growth based on science and technology. Universities in the European Union award 36% of science and engineering (S&E) degrees in the OECD area while the U.S. universities award 24%. To compensate, the U.S. draws on the skills of foreign born scientists and engineers. While some OECD countries such as the UK and Canada are important sources for scientific personnel in the U.S., three times as many foreign born scientists are from China and twice as many from India as from the United Kingdom. In many cases, these foreign-born workers come from the national university system. Foreign students represent more than a third of PhD enrolments in Switzerland, Belgium and the United Kingdom, % in the United States, 21% in Australia, 18% in Denmark and 17% in Canada. In absolute numbers, the United States has far more foreign PhD students than other OECD countries, with around 79 000. The United Kingdom follows with some 25 000.

The information economy. Information and communication technology (ICT) continued to spread, despite the slowdown in parts of the ICT sector. In Denmark, Germany, Sweden and Switzerland, some two thirds of households had access to a home computer in 2002, and in many OECD countries 80% or more of the enterprises with ten or more employees now use the Internet - this includes countries like the Czech Republic and Spain. Broadband access is more varied and is most widely diffused in Korea, Canada, Sweden, Denmark, Belgium and the United States. In Denmark and Sweden, one out of five enterprises accesses the Internet through a connection faster than 2Mbps.

The integration of the Internet into everyday life continues apace. In the United States, almost 40% of Internet users buy on line. The share of electronic sales in total U.S. sales grew by 70% between the fourth quarter of 2000 and the fourth quarter of 2002, reaching 1.5% of retail sales. In Portugal and Sweden, about half of all Internet users play games on line and/or download games and music. In Sweden and Denmark, more than half of all Internet users utilise e banking.

The global integration of economic activities. The growing knowledge intensity of OECD economies is accompanied by rapid economic globalisation. The trade to GDP ratio increased by about 2 percentage points over the 1990s in the United States and the European Union, although it remained stable in Japan. Trade in high technology goods, such as aircraft, computers, pharmaceuticals and scientific instruments, now account for over 25% of total trade, up from less than 20% in the early 1990s. A significant portion of this trade is between different affiliates of a multinational enterprise: the share of intra firm exports in total exports of manufacturing affiliates under foreign control ranges between 35% and 60% in the OECD countries for which data are available.

The amount of manufacturing R&D expenditure under foreign control has grown by nearly 90 per cent between 1993 and 1999 (current prices) with the U.S. being the destination for nearly half of this investment, accounting for about 18 per cent of all U.S. manufacturing R&D in 1999. For many countries, including Canada, Ireland, Hungary, the Netherlands, Spain, Sweden, and the UK, foreign affiliates account for 30 per cent or more of manufacturing R&D and over 70% in Hungary and Ireland.

Productivity and economic structure. Some OECD countries increased growth over the 1990s, due to a combination of factors, including higher labour utilisation, capital deepening, notably in ICT, and more rapid multi factor productivity (MFP) growth. Over the second half of the 1990s, MFP growth accounted for a considerable part of overall growth of GDP, particularly in Finland, Greece, Ireland and Portugal.

By 2000, services accounted for 70% of OECD GDP; manufactures accounted for about 18%. In many OECD countries, business services currently account for the bulk of labour productivity growth. Part of the increase in the services sector's contribution to value added reflects the manufacturing sector's greater demand for services, some of which is due to the outsourcing of services previously produced in house. Estimates of the amount of services embodied in one unit of final demand for manufactured goods show that it was significantly higher in the mid 1990s than in the early 1970s.

With the essential findings presented in bullet points and methodological notes on indicators and data sources, the STI Scoreboard combines statistical rigour with easy access and readability. An electronic version will be available complete with a data appendix and links to the underlying databases. The electronic version also gives users "clickable" access to the data used in charts and figures.(see www.oecd.org/sti/scoreboard)

The table of contents for the STI Scoreboard 2003 is available here.

The highlights for the STI Scoreboard 2003 are available here.

Readers can access the full version of the STI Scoreboard 2003 choosing from the following options: