With employment in manufacturing and construction being particularly badly hit during the recent crisis, the role of services in many OECD countries became even more significant. By 2009 services accounted for over 72% of OECD employment reaching about 80% in the United Kingdom, the Netherlands and United States. Public services continue to be significant employers; the OECD average was about 30% in 2009 and reached over 35% in some countries, particularly in Scandinavia. Countries that still have a significant industrial or agricultural base (such as Poland, Slovenia and Turkey), inevitably rely less on services; however, services are still responsible for over half of their employment.
Manufacturing production in many OECD economies has declined in recent decades so that, on average, services now account for about 70% of OECD GDP. In fact, in the United States and the United Kingdom, employment in manufacturing industries is now less than 10% of total employment. As part of this general decline, the scope and nature of manufacturing has changed so that what was once dominated by skilled trades and vocations, machine operators, assembly line workers, etc., now relies increasingly on service occupations and service inputs. This reflects the increasing use of technology in production, international sourcing of more sophisticated intermediate inputs and a range of social factors (such as the changing skill composition of populations).
Firm size and dynamics
Business dynamics have a significant impact on an economy’s overall productivity growth, and this in turn affects a country’s ability to compete globally. There is mixed empirical evidence on the relation between firm size and business dynamics, but small and medium enterprises (SMEs) play a key role in all countries and are significant generators of employment and income. In the OECD area, SMEs employ more than half of the private sector’s labour force. In the European Union, they account for over 99% of all enterprises. SMEs employing between 1 and 9 persons, also called micro firms, represent more than 80% of all firms in most OECD countries.
An economy can be defined as "specialised" if a few sectors account for a relatively large share of the country’s GDP, whereas it is "diversified" if each of a relatively high number of sectors accounts for a small share of GDP. Industrial specialisation or diversification patterns relate to economies’ long-run productivity, resilience to a crisis, investment patterns, innovativeness and performance of firms and sectors. The Hannah-Kay (HK) diversification index captures a country’s full sectoral composition and accounts for the influence of larger sectors. A lower HK corresponds to rising sectoral specialisation. The concentration ratio (CR) index shows the share of value added accounted for by the economy’s top four sectors.
Foreign affiliates contribute to a host country’s international competitiveness through several channels. They provide access to new markets and new technologies for domestic suppliers and buyers, generate knowledge spillovers for domestic firms and typically invest a higher share of their revenues in R&D. Foreign affiliates are responsible for a large part of host countries’ employment, turnover and value added. The share of foreign-controlled employment in OECD countries ranged from close to 5% to 35% in 2008. In terms of value added, the foreign share is higher, partly because multinational enterprises are typically active in capital- and scale-intensive industries. Smaller countries such as the Czech Republic, the Slovak Republic and Hungary have a stronger presence of foreign-owned firms; in addition, the presence of foreign affiliates has increased significantly in these countries during the last decade. Foreign affiliates account for a significantly smaller share of total activity in the United States and Italy.
The relative impact of the economic crisis on international trade can be seen in a comparison of exports and imports as a percentage of gross domestic product (GDP) between 2008 and 2009. GDP was severely affected in many countries, but international trade suffered even more. After widespread increases in the trade-to-GDP ratio between 2000 and 2008, all OECD countries (except Iceland and Ireland) and the BRIICS (Brazil, the Russian Federation, India, Indonesia, China, South Africa) saw a drop in this ratio between 2008 and 2009, mostly owing to significant drops in trade in goods. In many countries it fell below the ratio recorded at the beginning of the decade.
Import content of exports
The "import content of exports" measure (proposed by Hummels et al., 2001), provides an indication of the increasing importance of the international fragmentation of production processes. By linking OECD’s "harmonised" national input-output tables (which show countries’ interindustry transaction patterns) with bilateral trade by industry statistics, the value of imported intermediate goods and services subsequently embodied in exports can be estimated. While this highlights the imports required to meet the demand for exports, changes in the import content of exports can also reveal the evolution of domestic value added due to exporting activities.
When comparing total business research and development (R&D) intensity (R&D expenditure relative to value added or gross domestic product) across countries it is important to take into account differences in their industrial structure. While there is significant variation in R&D intensity within sectors, some sector-specific patterns make it very difficult for a country to raise its R&D intensity significantly without fundamentally changing its industrial structure. An understanding of the extent to which structural differences can account for observed differences in overall business R&D intensity can be achieved by constructing an indicator that shows what a country’s total R&D intensity would be if it had the same industrial structure as the average for OECD countries.
Patent documents contain several types of information (e.g. technical class code, title, abstract, claims, etc.) which are useful for classifying patents in particular fields and investigating the emergence and growth patterns of new technologies. The rise in patent applications filed under the Patent Cooperation Treaty (PCT) stabilised at an average rate of 5% in the 2000s. The increase was not evenly distributed across countries or technological fields. Since 2000, patenting in the information and communication technology (ICT) and nanotechnology sectors grew at a similar pace (respectively 3% and 4%), whereas biotechnology patenting showed an inverse trend (–4%).
In 2010, Internet and other e-commerce sales transactions averaged 13% of total turnover in countries for which data are available. Ireland, Norway and the Czech Republic reported the largest shares. In Ireland the share of e-commerce sales is almost twice the average.
Applicants in patent documents can be enterprises, organisations or persons. Business registers include information on enterprises and their main characteristics. By matching patent applicants’ names to enterprise names in business registers the patenting behaviour of firms can be linked to firm characteristics such as industrial sector, age and size. Matched patent and firm data can also review industries’ contribution to the development of key technologies, such as biotechnology and information and communication technology (ICT).
A classification based on innovation can complement the established and widely used technology classification that is based on industry R&D intensities. By considering the more general scope of innovation it draws on sectors, particularly services, that do not undertake relatively high levels of formal R&D. Innovation surveys capture a broad range of innovation activities from product and process to marketing and organisational innovations and account for both innovation inputs and outputs.
Technology performance: quality
Patent quality indicators try to capture both the technological and the economic value of innovations, and are typically based on patent citations, claims, patent renewals and patent family size. They are considered meaningful measures of research productivity and are found to be correlated with the social and private value of the patented inventions. The difference in average patent quality across firms is generally associated with the market evaluation of firms.
Technology performance: impact
A number of indicators use information on the technological fields of patents based on the International Patent Classification (IPC) system and on the forward citations (citations a patent receives) and backward citations (patents and scientific papers a patent cites).
Competing in the Global Economy - Notes
Competing in the Global Economy - References
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