OECD Science, Technology and Industry Outlook

1999-1428 (online)
2074-7187 (print)
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OECD’s biennial comprehensive review of key trends in science, technology and innovation policy in OECD countries. In addition to examining main trends across the OECD, the report delves into specific topics that are high on the agenda of innovation policy makers, such as the role of intellectual property rights and technology licensing markets in innovation performance, policies to enhance benefits of the globalisation of business R&D, human resources for science and technology, and the evaluation of innovation policy. While retaining its focus on developments in OECD countries, it also highlights key developments in a number of important non-member economies, including China, Russia and South Africa. A statistical annex provides up-to-date statistics on R&D funding, patents, researchers and other indicators of innovative performance.

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OECD Science, Technology and Industry Outlook 2008

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27 Oct 2008
9789264049949 (PDF) ;9789264049918(print)

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The OECD Science, Technology and Industry Outlook 2008 reviews key trends in science, technology and innovation in OECD countries and a number of major non-member economies including Brazil, Chile, China, Israel, Russia and South Africa. Using the latest available data and indicators, the book examines topics high on the agenda of science and innovation policy makers, including science and innovation performance; trends in national science, technology and innovation policies; and practices to assess the socio-economic impacts of public research. This volume also provides an individual profile of the science and innovation performance of each country in relation to its national context and current policy challenges.

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  • Global Dynamics in Science, Technology and Innovation
    This chapter reviews the main trends in science, technology and innovation across the OECD area and the BRICS economies. It examines the latest available data and indicators on the inputs, outputs and impacts of R&D and innovative activity. Where possible, the analysis highlights recent developments, comparing them to longer-term trends. It considers the financing of innovative activity, innovation performance, R&D in key technologies, the scientific and technological outputs of R&D and innovation, the role of globalisation in changing patterns of innovation and human resources for science and technology.
  • Main Trends in Science, Technology and Innovation Policy
    This chapter presents the main trends in national science, technology and innovation policies, focusing in particular on policies and programmes introduced between 2006 and 2008. It discusses developments related to public-sector research, government support for business R&D and innovation, collaboration and networking among innovating organisations, globalisation of R&D and open innovation, human resources for S&T, and the evaluation of research and innovation policies.
  • Australia
    The Australian innovation landscape displays a number of notable strengths. Its scientific publications are well above average: 780 scientific articles per million population (over 2% of world publications), and 16th worldwide for publication impact. Australia also has a strong skills base. Human resources for science and technology represent 38% of the labour force and in 2004 it had 8.4 researchers per 1 000 total employment, because of strong employment of researchers in the higher education sector.
  • Austria
    Austria performs well on a number of science and innovation indicators. Around 25% of firms introduced a new-to-market product innovation during 2002-04, and non-technological innovation is undertaken by more than a third of firms in both the manufacturing and services sectors. Austria’s scientific publication output is above average at 554 articles per million population.
  • Belgium
    Belgium’s innovation system has some strong features: human resources in science and technology represent over 30% of total employment, and the number of science and engineering degrees as a percentage of all new degrees is around the OECD average. It is among the OECD leaders in terms of collaboration by large firms with partner organisations on innovation, with over 60% collaborating with another entity, more than 30% collaborating with higher education institutions, and around 20% collaborating with government institutions in 2002-04. Moreover, the innovation system is very open, with a considerable share of R&D financed by foreign sources and an above-average share of patents with a foreign co-inventor.
  • Canada
    Canada’s innovation performance exhibits both strengths and weaknesses. It scores high in terms of the quantity and quality of scientific articles, but the number of triadic patents remains under the OECD and EU25 averages. It performs well in terms of firms with new-to-market product innovations, especially among SMEs, but the share of turnover due to these products is among the lowest in the OECD area. More broadly, productivity growth has become a concern. While labour productivity grew above the OECD average from 1995 to 2000, it has since weakened, with annual growth of 1% in 2001-06, compared to an OECD average of 1.8%.
  • Czech Republic
    The Czech Republic continues to catch up with other OECD countries and performs above other eastern European OECD countries on a number of indicators. Between 2002 and 2006, annual growth in real GDP per capita increased from around 2 to 6%, and labour productivity grew strongly at 4.1% a year. Past reforms and accession to the European Union are leading to further expansion of export-driven manufacturing backed by foreign direct investment.
  • Denmark
    From the second half of the 1990s, innovation activity picked up, and Denmark is now one of the better-performing members of the OECD on many innovation indicators. However, productivity improvements have slowed and the gap in GDP per capita relative to the best performers remains. In 2006, Denmark’s gross domestic expenditure on R&D (GERD) was 2.43% of GDP, above the OECD average of 2.26%. Business performed 67% of R&D (and funded 60% in 2005). Denmark aims to achieve research spending of 3% of GNP in 2010, with one-third financed by government. The interaction between government and industry in science and innovation differs depending on the indicator – cross-funding of R&D is low, but a relatively high 30% of large firms collaborate with higher education institutions. The government has set benchmarks to increase such collaboration.
  • Finland
    Finland has consistently ranked at the forefront of innovation investment and performance, and innovation policy is at the heart of public policy. Finland ranks second in the OECD in terms of R&D intensity (at 3.45% of GDP) and aims at 4% of GDP by 2010. Business R&D stood at 2.44% of GDP in 2007 and the intensity of higher education R&D has doubled over the past 15 years. Equally, Finland leads the OECD in number of researchers in the labour force, with close to 5% average annual growth in numbers from 1997 to 2006.
  • France
    France’s strengths in areas such as nuclear energy, aerospace and transport are renowned. However, innovation performance, as measured by various indicators, has declined in recent years. R&D expenditures slowed from 2.3% of GDP in 1995 to 2.1% in 2006, behind Germany (2.5%) but just ahead of the United Kingdom (1.8%). Until the mid-2000s, France lagged its main competitors in expanding fields such as biotechnology and nanotechnology.
  • Germany
    Germany has traditionally been one of the OECD’s top performers in science, technology and innovation. With a mature national innovation system, including a number of large, well-established research institutions and firms, it has a large and growing share in total OECD high- and medium-high-technology exports, and is the fourth most intensive patenter in the OECD area (adjusted for population). However, its productivity performance has been slipping against the leading OECD countries. Extracting greater benefits from existing innovation capabilities will be essential to boost productivity and maintain high living standards.
  • Greece
    In recent years, economic growth has been robust, with significant increases in per capita income. However, Greece remains one of the lowest-income countries in the OECD, with slow employment growth, low labour productivity and weak competitiveness. The challenge is to expand the country’s growth potential and improve productivity, so as to boost employment and quality of life.
  • Hungary
    Hungary continues to catch up to living standards in other OECD countries, and productivity has grown at an annual average of 4.3% from 2001 to 2006. However, progress has been offset by unstable public finances, which have undermined business confidence and prompted firms to focus on the short term to the detriment of longer-term goals such as investment and innovation. Ongoing reforms to restore predictability in the macroeconomic and regulatory environment are an essential prerequisite for improved innovation performance.
  • Iceland
    On many innovation indicators, Iceland ranks among the top OECD countries, and it enjoys high per capita income and robust economic growth. While labour productivity levels still lag those of the United States, growth in labour productivity rose to 3.2% a year over 2001 to 2006. Resource-based industries and services form the basis of the Icelandic economy. As a result, measures of technological and knowledge intensity are often below the OECD average. However, the country has a complex and well-developed innovation system with a variety of actors from government, industry and the science community. Its innovation performance is robust, with a large share of firms introducing new-to-market product innovations. The small internal market (a population of just over 300 000) has stimulated many companies to internationalise, and international linkages are a notable element of the innovation system.
  • Ireland
    For more than a decade, growth of GDP per capita has been among the fastest in the OECD area, and by 2006 Ireland had the fourth highest income level in the OECD area in purchasing power parity terms. With a commitment to science, technology and innovation of EUR 8.2 billion for 2006-13, the government is keen to foster both a strong science base and enterprises able to create knowledge, innovate and exploit knowledge in global markets.
  • Italy
    Italy’s share in world trade has declined and low productivity growth has led to a widening gap in GDP per capita with the best OECD performers. Restoring economic dynamism will require addressing various challenges. Improving the environment for innovation is a crucial part of the solution. Spending on R&D is below the OECD and EU average, and in 2005, R&D intensity (gross domestic expenditure on R&D [GERD] as a percentage of GDP) was 1.1%, compared to 2.25% for the OECD area and over 1.7% for the EU. The private sector financed only 40% of R&D and performed 50%, compared to OECD averages of 63 and 68%, respectively.
  • Japan
    On many indicators, Japan is at the forefront of world science, and is among the leading OECD countries on measures such as R&D intensity and business R&D. However, R&D outputs have not always appeared commensurate with the substantial investment in R&D. In particular, labour productivity growth has remained close to the OECD average for the past decade, and is the main factor behind the gap in GDP per capita with the leading OECD countries. Strengthening the efficiency of the innovation system will be essential to increasing growth.
  • Korea
    Korea has performed exceptionally well over the past decades. Innovation – with the adoption and adaptation of imported technologies – played an important role in its efforts to catch up with the leading OECD economies. However, to maintain its strong productivity performance and move more towards being a technological leader, Korea must address some challenges.
  • Luxembourg
    In recent decades, Luxembourg’s economic growth has been buoyed by the strong performance of the financial and the transport, storage and communications sectors. However, uncertainty about the future growth of these sectors means that it must prepare for a transition to a different pattern of growth. Innovation will play a major role by contributing to productivity and helping to develop new and improved products and services.
  • Mexico
    Over the past decade Mexico’s efforts have focused on achieving macroeconomic stability and stronger growth. However, its reforms have not led to the productivity growth necessary to catch up to other OECD countries. Continued structural reforms will be needed to put the country on a firm basis to boost innovation, productivity and growth.
  • The Netherlands
    The Netherlands is among the OECD leaders in knowledge creation: it ranked fifth in scientific publications per capita in 2005 and its publications were third in terms of prominence. It also ranked fifth in terms of triadic patenting per capita, partly owing to strong innovation in key multinationals, such as Philips. Moreover, a relatively large workforce is engaged in occupations requiring human resources for science and technology and its innovation system is very open. A considerable share of R&D is financed by foreign sources, and a relatively large share of firms collaborate on innovation.
  • New Zealand
    Innovation is central to meeting the ongoing challenge of boosting New Zealand’s productivity growth to raise income per capita. The innovation system has been shaped by the country’s features: its relative geographic remoteness, small size, demanding physical topography, and focus on exploiting natural resources. A more innovative economy requires an excellent business environment, robust steering and financing mechanisms for the public research system, and strong domestic and international networks for knowledge flows.
  • Norway
    Norway’s economy continues to expand, led by global demand for energy resources, but its ability to boost longer-term growth and prepare for a future decline in oil reserves will hinge on continued productivity gains supported by innovation. The country’s performance in science and innovation is mixed. Scientific output is high: with 788 scientific articles per million population in 2005, it leads the United Kingdom (756) and Germany (535), but trails Sweden (1 108). The quality of Norwegian science is high by international standards in several areas: marine, freshwater and land-based biology and agriculture; medicine and dentistry; Earth sciences; physics; technology; and mathematics. It also has higher than average shares of human resources in science and technology and R&D personnel. About 30% of all R&D in Norway takes place in the higher education system, mainly universities and specialised university institutions, and funding has increased since the 1990s.
  • Poland
    Economic growth accelerated in 2007, led by strong domestic demand and the process of convergence with the EU. The government is undertaking structural reforms in labour markets, education and tax policy to help improve productivity and industrial competitiveness. Poland invests little in R&D (0.56% of GDP in 2006), of which 57.5% is financed by the public sector and only one-third by the business sector. This low R&D intensity reflects a relatively low level of GDP and an industrial structure heavily weighted towards low technology, as well as a low level of R&D in foreign affiliates of multinational firms. It also reflects weaknesses in the framework conditions for innovation and a public research system that is insufficiently linked to industry.
  • Portugal
    Economic growth has lagged that of most EU countries; from 2001 to 2006, real GDP per capita growth averaged only 0.1% a year. Although R&D spending has grown faster than GDP (9% a year on average between 1995 and 2006), R&D intensity remains very low (at 0.83% of GDP in 2006). The government sector still accounts for most research funding, although industryfinanced R&D increased from 0.11 to 0.29% of GDP from 1995 to 2005.
  • Slovak Republic
    The Slovak Republic has enjoyed strong GDP growth thanks to a rapid rise in labour productivity. As a catching-up economy, however, it invests little in R&D and innovation. In 2006, spending on R&D stood at 0.49% of GDP, near the bottom among OECD countries. This figure should be viewed in light of the drop in R&D spending due to the restructuring and closure of government and industrial R&D institutes during the transition to a market economy.
  • Spain

    Despite strong economic growth over the past decade, labour productivity growth has been modest. GDP per hour worked expanded by 0.9% a year between 2001 and 2006, compared to the OECD average of 1.8%. The government’s National Reform Programme aims to boost productivity and sustainable growth through reforms in product and labour markets, higher education and human capital, investment in infrastructure and research and innovation.

    Spain spent 1.2% of GDP on R&D in 2006, significantly below the EU27 (1.76%) and OECD (2.26%) averages. However, this is a substantial increase from the levels of the mid-1990s. The business sector finances 47% of gross domestic expenditure on R&D; the government finances 42.5%, 5.9% is financed from abroad and 4.5% from other national sources. Boosting R&D and innovation in the business sector is a challenge as most industries are relatively low-technology and most firms are small or medium-sized.

  • Sweden
    Sweden’s above-average growth in GDP per capita in recent years has been partly driven by technological change. At 3.73% of GDP in 2006, Sweden leads OECD countries in terms of R&D intensity. The business sector contributes the lion’s share: business expenditure on R&D accounted for 2.79% of GDP in 2006, compared to the OECD average of 1.56%. Higher education R&D spending as a share of GDP is high (0.76%) and it performs around 20% of total R&D, on a par with most OECD countries. The government institute sector is smaller and performs 4.5% of R&D.
  • Switzerland
    Switzerland has enjoyed a rebound in economic growth but economy-wide productivity growth continues to lag, particularly in sectors with weak exposure to international competition (e.g. network industries). Faced with high labour costs and global competition, maintaining its lead in innovation is important for the country’s future growth.
  • Turkey
    Economic growth has picked up in recent years, but the income gap with other OECD countries remains large. As a catching-up and open economy, Turkey’s main economic sectors – agriculture, textiles and clothing, machinery, steel, lumber, paper, and transport equipment – are under pressure from lower-wage competitors vying for market share. Raising productivity and innovation in these sectors will be crucial for maintaining competitiveness and attracting the foreign direct investment (FDI) needed to continue the modernisation process.
  • United Kingdom
    The United Kingdom performs well on several innovation performance indicators. It has a strong reputation for world-class research and ranks second only to the United States in production of highly cited articles. It produces a considerable number of science and engineering graduates at the doctoral level, and hosts the largest number of international doctoral students after the United States. It has good international linkages, ranks first in business enterprise expenditure on R&D funded from abroad, and has well-developed venture capital thanks to a deep financial system.
  • United States
    Following a period of robust expansion since 2001, economic growth in the United States slowed at the end of 2007. The diffusion of information and communication technologies (ICTs) continues to fuel productivity growth, especially in the business services sector. The United States is an innovation powerhouse, but its lead is increasingly challenged from some of its main international trading partners and emerging economies. R&D intensity fell slightly to 2.6% of GDP in 2006, down from 2.7% of GDP in 2001, although total R&D expenditure expanded in real terms to USD 344 billion, led by increases in business sector R&D spending (USD 208 billion in 2006). The share of R&D performed by government has fallen (to 11.1% in 2006), while that of the higher education sector has grown (to 14.3% in 2006 compared to 12.1% in 2001).
  • Brazil
    Brazil’s R&D intensity, at 1.02% of GDP in 2006, is quite low by OECD standards, although it exceeds that of Portugal, Turkey, Poland and Mexico. Among some non-OECD countries, its R&D intensity is below that of China and Russia, but higher than that of Argentina. The weight of public and business R&D are similar, with business expenditure on R&D at 0.49% of GDP. Brazil is one of the leading non-OECD recipients of foreign direct investment, and around 60% of patent applications at the Brazilian patent office come from nonresident inventors.
  • Chile
    Robust growth in GDP per capita for most of the past two decades has helped Chile to join the ranks of high middleincome countries; its income per capita is now similar to that of Mexico. Economic reform, in particular the adoption of international best practice in macroeconomic management and development of market mechanisms, has underpinned Chile’s success in catching up. However, a gap with advanced countries remains, mainly owing to a gap in productivity performance. Chile’s R&D intensity, at 0.67% of GDP in 2004, is less than one-third of the current OECD average of 2.26%. However, it exceeds that of OECD countries such as Greece, Mexico and Poland. At 0.31% of GDP, business spending on R&D is particularly low. This is partly due to Chile’s specialisation in non-R&D-intensive industries, but also to the fact that the vast majority of SMEs in all areas do not engage in R&D and innovation. The overall orientation of Chile’s R&D partly reflects the still dominant, although declining, role of higher education in the performance of research.
  • China
    China’s R&D intensity reached 1.42% of GDP in 2006, thanks to a rapid, decade-long increase in R&D expenditure. The government intends to have R&D intensity reach 2% by 2010. Owing to the market-oriented reforms of the R&D system since 1985, industry’s share of GERD rose to 69% in 2006, a similar level to that in Finland, Germany and Sweden. China has the world’s second largest stock of human resources for science and technology (HRST), just after the United States and ahead of Japan. Its share of university graduates with degrees in science and engineering is 39.2%, almost twice that of the OECD average. On the other hand, the overall level of tertiary attainment is still quite low, even by developing country standards, and the number of researchers per 1 000 total employment is very low, at about one-tenth of the level of Finland, the world leader.
  • Israel
    Israel stands out on a number of innovation indicators. At 4.65% of GDP it has the world’s highest R&D intensity, over twice the OECD average of 2.26%. The intensity of business R&D expenditure is also higher than in all OECD countries, at 3.64% of GDP in 2006. Israel has the fifth highest number of scientific articles per million population, after Switzerland, Sweden, Denmark and Finland. It is also among the leaders in the number of triadic patent families per capita; however, in absolute terms it accounts for less than 1% of all triadic patent families, on a par with Australia and Belgium. In addition, Israel has a strong information and communication technology sector which accounts for about 20% of total industrial output, 9% of business sector employment, and a large share of the output growth of Israeli industry.
  • Russian Federation
    The Russian research and innovation system suffered a sharp decline in funding during the 1990s and only in recent years has it begun to recover. R&D intensity fell from over 2% of GDP in 1990 to 0.74% in just two years, and after reaching 1.28% in 2003, it declined to 1.08% in 2006. The government finances the bulk of R&D; less than a third comes from industry. Business R&D intensity is a low 0.72% of GDP, less than half the peak of 1.57% in 1998. Foreign funding increased from 1994 to 2006, from 2% to 9.4% of gross domestic expenditure on R&D.
  • South Africa
    South Africa’s innovation system is in transition. R&D intensity, with gross domestic expenditure on R&D (GERD) at 0.92% of GDP in 2005, is now broadly in line with the country’s income level, and growth in GERD has been robust in recent years, with real expenditure doubling from 1997 to 2005. Business funds 44% of GERD, down from 56% in 2001, contrary to trends in transition economies such as China. However, South Africa has a core of strong innovative business enterprises, and the share of GERD performed by the business sector (58%) is similar to or higher than some OECD countries with higher R&D intensity, such as Italy, Spain and Canada. The ratio of business expenditure on R&D to GDP stood at 0.53% in 2005.
  • Annex 3.A1
    The first graph for each country – the radar graph – illustrates the position of the country against the OECD average performance on a set of common indicators. Data for non-OECD countries are not included in the average. The indicators were selected on the basis of policy relevance, as well as availability of quality data for a majority of countries, in order to provide a broad snapshot of science and innovation performance. They focus on research and innovation inputs, scientific and innovation outputs, linkages and networks, including international linkages, and human resources.
  • Assessing the Socio-economic Impacts of Public R&D
    Understanding and measuring the impacts of public R&D have become a central concern of policy makers who need to evaluate the efficiency of public spending, assess its contribution to achieving social and economic objectives and legitimise public intervention by enhancing public accountability. This chapter presents a selection of impact assessment practices in a number of OECD countries. It reviews various methodological approaches and emphasises the role in these assessments of their timing, objectives, nature and scope.
  • Innovation in Firms
    This chapter contains some preliminary findings and lessons learned from the OECD Innovation Microdata project, the first large-scale attempt to exploit harmonised firm-level data from innovation surveys for economic analysis. It uses both microdatabased indicators and more sophisticated techniques, such as explorative data analysis and econometrics, to analyse innovation performance and innovative activities.
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